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04/23/2006

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Ian Samuel

This is a persuasive account. However, a few points.

It seems that one way to combat the problem of poverty is to lower the costs of a decent life. If housing, food, and so forth are cheaper, then lower incomes are needed to survive and live relatively well. In other words, efforts to reduce poverty could be directed at reducing "the poverty line."

Unfortunately, in the U.S., the "poverty line" is a useless barometer of what it actually takes to live a decent life, for several reasons. Geography plays a major role in true cost of living, but the official government estimate is an across-the-board figure. Moreover, the methodology (cost of food times three) is questionable.

However, pushing at this problem in the other direction is that societal standards of what it takes to live a "good life" tend to rise as the costs of that life fall. In other words, we now believe a good life requires indoor plumbing; that was not always so. Perhaps a more useful barometer is not "what does it take to live a good life?" but "at what level is a person confronted with insurmountable structural barriers to class mobility?" By this I mean, if you are starving to death, it is unlikely you could (even if you are very smart) train up enough to earn a good wage; similarly, if you are homeless, you face a structural barrier to ever having a home, because it is hard to find a job.

These thoughts are very preliminary, but I hope you think they're interesting.

Hans Gruber

"Finally, rising income inequality in the United States is due in part to increased immigration, since immigrants, legal as well as illegal, tend to work for lower wages than citizens. Immigrants do not, however, compare themselves with wealthy citizens, but rather with the much lower wages they could expect to earn in their countries of origin. Rather than immigrants envying wealthy citizens, many citizens are hostile to poor immigrants!"

Judge Posner, why be shocked that citizens would be hostile to immigrants when you concede that massive immigration increases income inequality? First, many are likely to resent increased poverty even if their own wages are unaffected. Who wants to live among poverty? Who wants their children or grandchildren to attend schools with many poor and bilingual students (this may seem impolitic, but it's the bare, untarnished truth)? On top of all of this, the "hostile" citizen understands that all of these problems are the result of a government refusing to enforce its laws and the manifest will of the people.

Further, I believe you are deluding yourself if you believe immigrants are less affected by envy than the average citizen (just look at voting preferences to get some idea of whether the recent immigrant desires more or less income redistribution).

Ad Hoc

On the symantics of the income debate, it is important to recognize the continued racial overtones of the conversation. Professor Posner's anthropological evaluation of income disparity between 'black' and 'white' envy is compelling. Admiration over envy is a well considered barometer of social attitudes towards personal wealth. However, even a reader who is workingly proficient with the Professor's work, and who understands the lack of malevolence in his use of the 'black' and 'white' terms, cannot help but recoil at the antiquated terminology.

In the future, one hopes that our social lexicon will evolve to a point where the excellent analysis presented on this blog can be interpreted without the sad connotations which its terminology presently evokes.

Hans Gruber

Ad Hoc,

I suppose you would lecture Judge Posner if he used the adjective "niggardly" as well. I figured somebody would try to insinuate it was a racist term, but didn't expect the criticism to appear so soon!

Jay Jeffers

It's nice to hear someone broach this issue so clearly. I always enjoy reading Judge Posner. We often hear "the rich are getting richer and the poor are getting poorer." It seems to me that the rich may be getting allot richer, but the poor are also getting richer. I'm not sure where the "the poor are getting poorer" story came from, but it doesn't seem to be true.

I especially agree with Judge Posner's comments about the improved state of automobiles, medical care, and electronics. However it does seem like there are some things that the poor are exposed to that the rich aren't; namely, bad schools and dangerous neighborhoods. Since this is a big factor in how people assess where to live and how content they are with their lives, schools and neighborhood quality seem important.

This may be another suspect story that society told me, but it seems like there was a time in the childhood of the baby-boomer generation when working, lower-middle class people could send their children to the same schools that rich people sent their children to. This of course still happens, but less and less IMHO. From my perspective the only way to ensure that your children go to a school mostly free from serious violence is to move somewhere (perhaps somewhere you wouldn't have gone otherwise) specifically for the school system or send them to private schools.

As to neighborhood quality, again I may have a fantasy view of the era of my parentsí childhood, but poor people used to live in areas without crack dealers or meth labs, the former being the urban story and the latter the rural. It's interesting that crack has been a serious problem in urban communities (promoting drug addiction and gang violence) for many years, but now that meth has infiltrated rural communities all across America, politicians seem to agree that something has to be done and fast. But that's neither here not there; the point is that the poor in America live in areas where there are more bars, XXX shops, bad public schools, and much more violence. And there are many cities were the middle and working class (not just "the poor") are exposed to these harms as well.

Perhaps none of these observations touch on which system of taxation we should have, or which party should be in office (for these problems seem to exist equally either way). But if the topic is on the quality of life of the rough categories of rich, middle class, and poor, then school systems and neighborhood problems of drugs and violence need to be included in the discussion.

Public schools may at the end of the day be local problems, and I understand that Judge Posner has serious disagreements with our current national drug policy.

One could point to periods in American history where social stratification was much greater than it is now. After World War II, legal equality expanded greatly, but in the same period of time, society has had to face new problems in drugs and increased violent crime. While violent crime has dipped in the last several years, it still must be much higher than the rate my parents saw in the 1950's. These problems may have occurred independently of "liberal" or "conservative" solutions to social problems. However the poor bear the brunt of these social problems and therefore these realities should be a part of any discussion that claims to describe the condition the poor live in. These problems seem to be getting worse in this generation of young people, in spite of the recent dip (which according the Levitt is due to abortion). Problems as serious as these become so pervasive that they are having a spillover effect into the other classes to the point of significantly impacting important decisions people make about where to live; even if you like a house, it may be in the wrong district. Increased social stratification may result from these conditions.

If the picture I have painted is true and I was a poor man, I would much rather go back to a day when I could send my children to school without worrying about gangs or meth or crack or extremely poor schools. I agree that the poor and middle class are able to gain access to things like nicer cars, Gameboys, Air Jordan's, and voicemail, and this is definitely an improvement worth mentioning. But these trinkets pale in comparison to quality schools, living in a neighborhood where folks took pride in their homes, and the peace of mind that comes with knowing that your child is safe. These dreams seem increasingly out-of-reach for the lower classes.

Haris

Hans: Immigrants can't display their jealousy at the polls until they become citizens, which for illegals is never and for legals is at least 5 years of law-abiding, productive life after their arrival. Since we set the rule that after 5 years, you deserve the rights of a citizen, they are entitled to vote for more redistribution after this time if they so choose. I haven't seen this empirically confirmed but I am inclined to think you're right.

That said, Judge Posner makes an excellent point that income cannot be measured solely in pecuniary terms. Leisure is often omitted from this calculation even though it is very highly value and most certainly considered wealth by many people. Thus, someone who is on the lower end of the financial income spectrum might be better off than someone who make somewhat more money but works many more and unpredictable hours. The 80-120 hour work weeks of my junior investment banker friends make me shudder, and I am sure I'm not the only one would take less money just to have more free time. This is particularly true for those with families and children. This just goes to show that the income disparity is a much smaller issue than it would appear from simply looking at the numbers.

Hans Gruber

"Immigrants can't display their jealousy at the polls until they become citizens, which for illegals is never and for legals is at least 5 years of law-abiding, productive life after their arrival. Since we set the rule that after 5 years, you deserve the rights of a citizen, they are entitled to vote for more redistribution after this time if they so choose. I haven't seen this empirically confirmed but I am inclined to think you're right."

Amnesty. We keep giving amnesty, so yes illegals get to vote eventually. Further, it's incorrect to say that illegals can't vote at all. Some cities have actually allowed illegals to vote in local elections.

Even if amnesty isn't given, and the illegals themselves never vote, their children carry forward their political beliefs more than they do not. This is true across the political spectrum. Bottom line: Our immigration policy promotes both increased income inequality and strengthens the restributionist impulse.

David

Does Judge Posner really believe the following passage?:

"The rich have more and better goods, but they do not act as if they were a 'superior' sort of person, refined, well bred, looking down on the average Joe."

Find me one Harvard grad who does not feel "superior" (justifiably or not) to a graduate of say, the University of Alabama, and I will concede the point.

The problem with discussing the "middle class" in America is that everyone believes themselves to be middle class. Even multi-millionaires lay claim to middle class status, when they're knee deep in mortgage payments for the nice suburban home and the summer home, car payments for the two BMWs, and tuition payments for private high schools and ivy league colleges. But let's have a reality check here: that's not "middle class" in any sense of the word (or even the euphamistic "upper middle class"). While no one wants to admit to being rich in America (expect perhaps Bill Gates or Paris Hilton), wishing that one were middle class doesn't make it so.

I'm not sure whether this has anything to do with the desirability/undesirability of rising income inequality. But it should put the debate in perspective. If we have to close a $400 billion/year budget gap, it's better to tax the estates, dividends, and summer homes of the Hamptons set than the hard-earned income of the family of four with a combined income of $50,000. Marginal tax rates in this country are nowhere near the point of diminishing returns. And, when there is a health care crisis for ordinary Americans, it is not a solution to tell them to put money they don't have into health care savings account, so that they can pay "market" rates (that is, price-gouging rates) for medical services and presecription drugs.

Income inequality in America does not have to be reversed. But government can and should take steps to equalize the quality of life for all Americans, regardless of income level.

Greg

Good discussion. I like Ian's point about
defining poverty.

What are some ways we can measure social
mobility? How do we know it's increasing
or decreasing? I've only heard of one
study on this point; it compared parents'
income levels with that of their children,
but it was limited in its findings.

If we have an acceptable level of social
mobility, we need not worry much about
income inequality.

Ad Hoc

Hans,

Judge Posner's reputation and CV with respect to civil rights, property rights and all matters of jurisprudence on race or any other form of discrimination is, in my opinion, beyond reproach. The symantics of his argument sould be bifurcated from the merits of his analyses and examined for what it says ABOUT SOCIETY, not the Judge himself.

Paco

Dear Judge Posner:

I especially liked your distinction between poverty and inequality. However, I have the impression that many commentators tend to reject or ignore this basic distinction, for they tend to define poverty in relative terms, so that there will always be poverty no matter how wealthy a given society is. For persons who define poverty in relative terms, there will always be 'poverty' no matter how rich the society is, unless incomes are more or less equal. A recent essay in The New Yorker on the subject of measuring poverty, written by one John Cassidy, I believe, provides a textbook example of this type of argument.

As I see it, the notion of relative poverty is unsound--a fallacy even--so I think that your distinction btw. poverty and inequality is a very important one (though often overlooked or ignored).

Donald Anderson

Do the math. Even if income levels increase at exactly the same percentage rate from top to bottom, the result is a growing disparity. Example: a $20,000-a-year earner who gets a 10 percent raise actually loses ground to a $100,000-a-year earner who also gets a 10 percent raise (the new incomes are $8,000 farther apart). The only way the lower earner can gain is if the upper earner gets an increase of less than 2 percent while the lower earner gets at least 10 percent. This simple equation seems beyond most of the media pundits. Curious.

Sophia Ong

I'd like to say a word about the immigration issue:

"Finally, rising income inequality in the United States is due in part to increased immigration, since immigrants, legal as well as illegal, tend to work for lower wages than citizens."

This argument presupposes that without immigration, those low-paying jobs would go unfilled by citizens. Presumably, citizens have a reservation wage that is higher than the wages paid by immigrant-held jobs, and without immigration, those low-paying jobs would have to increase their wage offers in order to attract workers. But wouldn't this be a form of economic inefficiency? That is, taking the assumption that all workers are paid according to their marginal productivity, the janitor-and-maid jobs held by immigrants pay exactly what the value of that labor is. If immigrants were not in the U.S. to take those jobs, those employers would have to raise their wages in order to meet the reservation wage of citizens, and would have to pay more than the labor is worth. So in this case, the income inequality caused by large volumes of immigration may in fact be an indication of efficiency in the labor market.

And on the redistributive impulses of immigrants: I am neither empirically nor anecdotally inclined to agree with the view that recent immigrants desire more income redistribution. George Bush saw significant gains in his portion of the Hispanic vote in the last election. Their beliefs on morality and religion clearly trumped any desire for redistributive policies. Finally, I am an immigrant and the child of immigrants. Immigrants tend to be a self-selected group; it's not just anyone that can pick up and leave their home country. From my observation, immigrant culture is based around self-reliance, not welfare or a nanny state.

Milk for Free

Judge Posner's point about the improvement in the quality of consumer goods has gotten insufficient attention, including from Judge Posner. Low earners spend more of their income on consumption than investment; many spend all their income on consumption, and some spend more than they earn by going into debt. The market price for a good sets up a kind of equality, so why not judge someone's income by the commodity value of what he buys with it?

By this measure, income inequality is steadily shrinking. A Mercedes Maybach costs about ten times as much as a Lexus LS, and about 30 times as much as a Toyota Camry. The Camry is very reliable, and while the LS is a fine car, most objective Lexus owners would concede that the Lexus, while a better car than the Camry, isn't three times as good, though the price would seem to imply it.

Judged by what people buy, not what they make, society is becoming more, not less, egalitarian.

Hans Gruber

Sophia,

Bush got around 40% of the Hispanic vote; exempting Cubans it's probably several percent less. This is, of course, an imperfect measure of restribution preference, but it's a decent proxy.

Bush did this poorly even though he promised amnesty and guest workers and more clearly supports the traditional social perspective most Hispanics share (compared to Kerry).

The only reasonable explanation is that Hispanics vote Democratic because they favor the increased progressivity in taxation and increased social welfare. That is, they are favor redistributionist policies considerably more than the average American.

Moreover, those who desired to be interviewed in Spanish were more likely to vote for Kerry by a significant margin (65% instead of 58%). This preference is at least a decent proxy for generational status and it shows a greater preference for the Democratic Party among first generation voters than second or third; even though relgiousity is probably greater among recent arrivals and their immediate descendants.

Sophia, I realize I have only dealt with Hispanics and that is a gross oversimplification but it is the lion's share of current total immigration.

Posner's (apparent) belief that immigrants are less likely to support income redistribution is erroneous. But perhaps he just intended to convey that the redributionist impulse is not sufficiently intense to warrant concern (that is, it's unlikely to be sociall disruptive).

Ad Hoc

Immigrants make the choice to come to America not because of income distribution (tax) policies which escape the consciousness of Americans and foreigners alike, but because of the meritocratic structure of our economy. However, as the learned judge writes,

"as society becomes more competitive and more meritocratic, income inequality is likely to rise simply as a consequence of the underlying inequality"

Recognizing that the vast majority of immigrants, through choice, circumstance or nationality have not invested in their human capital before they come to America; measuring the income equality between immigrants and life-long citizens is moot. Furthermore, measuring income disparity between disparate classes of Americans does not accurately quantify the two most important social barometers of prosperity: ability to subsist on one's wages and efficient/fair compensation for human labor.

Immigrants are every bit as rational actors as law school students (myself included). So long as wages and underlying economic conditions in America afford immigrants with superior opportunities compared to their countries of origin, immigrants will continue to arrive by any means necessary (just as students will put themselves through civil procedure hell with the promise of a six-figure salary). It stands to reason that if immigrantsí conditions in America were inferior to those they ëescapedí they would return ëhome.í Without the benefit of repatriation statistics, I cannot help but conclude that most do not make this choice.

Finally, immigrant or not, living wages are the next moral evolution in American human resource management. Like the migrant farm movements here in California under Cesar Chavez, immigrant labor will have its day. I venture to say that the subjects of our ivory tower debate put in a much more honest dayís work than I have EVER have. The market cannot help but reward their efforts.

James Janecek, M.D.

Meritocracy sounds so wonderful. Unfortunately for white people the cutting score for graduating from college seems to be an I.Q. of 110. This means means about 20% of this population can graduate from an academically oriented college.

As a sidelight, we now enroll 40% of our population in college; however, only about 20% graduate in 4 or 5 years.

As a second sidelight, there is a marked disparity in the IQs of inner cities and suburbs regardless of race. Presently, the average IQ in the inner city is 85. Since it usually takes an IQ of 85 or better to graduate from HS one would expect a drop out rate of 50% or about what it is in the inner city.

Finally, I know these findings are not egalitarian, meritocratic or even fair. Nature is not fair.

Hernnstein and Murray's "The Bell Curve" was the stealth book of the 90s. Someone has yet to write the stealth book of the new century. Perhaps someone will review the last 100 years of psychological research and realize most of our social, and especially educatonal, planning is based on an egalitarian ideal not replicated by nature.

Then if this person has time he might review E.O. Wilson's work that began "Neuroscience" as a separate and useful discipline. After doing so this person could then reason as to why it has taken so long for people to face the truth about individual, group and crowd psychology.

W

As a second sidelight, there is a marked disparity in the IQs of inner cities and suburbs regardless of race.

There are also the usual multicausal explanations: pollution, nutrition, etc.

Milk for Free

Re-reading my earlier comment, I'm not sure I made my point quite clear. Above a certain multiple of the price for a mass-market product, further increases in price accord only to literal or figurative diamond encrustation (DE), not to any significant increase in objective quality. For example, the iPod is a relatively accessible piece of technology. Designer iPods exist that are identical to mass-market iPods in function but feature a very high DE level and are very costly as a result. I doubt that the average iPod user spends much time lamenting the low DE level of his iPod.

Cars like the Maybach aren't appreciably more reliable or comfortable than more earthbound luxury cars, but are heavy on DE (including, for example, a champagne chiller). Americans aren't more upset about rising income inequality because they realize that above a certain income level (say, $300k a year), vast amounts of extra income yield only a very small marginal increase in standard of living.

N.E.Hatfield

Income inequality? is it really due to the rise of a system of Meritocracy or is it a Plutocracy masqerading as a meritocracy? Simply look at the occupations with the largest salary increases in the last twenty years. I believe you'll find that they all fall into the professional categories of Doctors, Lawyers and Injun Chiefs. All stand outside of the normal market forces that are driving wages and salaries down across the board.

It must be nice to have professional organizations that control the numbers of entry into and salary scales across the board in the "profession". Unions? Nah! We're simply Associations bent on maximising our members well being. Financial and otherwise. Never mind the fact that Foreigners unfamiliar with our system have said repeatedly, "There are an awful lot of people in this country who are over compensated for the value that they bring to the table.

Edith Wharton would love it. The Gilded Age is upon us again.

albatross

It's quite possible to have an increasingly meritocratic society that leads to an increasingly unequal society. I think that's some of what's driving the increasing inequality. When the external barriers to success are lifted, some people do a lot better than others. Freer markets, greater social mobility, better access to education, better access to information via the internet, new fields and businesses opening up that arent' already ruled by the guys who got there first, all these things make the world a really rewarding place for smart and driven people.

Brett Bellmore

"Bush did this poorly even though he promised amnesty "

Looking at the polls of hispanic citizens, (You know, the ones who can legally vote?) perhaps that should be, "Bush did this poorly because he promised amnesty".

After all, the majority of Hispanic Americans are opposed to an amnesty, not in favor of one.

Michael

Judge Posner and Professor Becker both ignore the strongest case for why rising income inequality ought to be an issue in the United States: the question of justice. Both Posner and Becker write about an ideal market that distributes its rewards based on merit alone. While both scholars note that merit is largely the result of life's natural lottery - Posner cites "differences in IQ, energy, health, social skills, character, ambition, physical attractiveness, talent, and luck" - neither takes up the case for why life's natural lottery is the most just distributor of wealth in this country. It is the contention that the natural lottery does not provide distributive justice that I was most hoping Judge Posner and Professor Becker would rebut.

James Janecek, M.D.

In spite of doubling K1-12 funding (adjusted for inflation) over the last thirty years, educational achievement has been stationary at best. (Source WSJ,Greene, Educating from the Bench, 27 April 2006)

Essentially, throwing money at egalitarian attempts to move the immovable up the ladder of success has not succeeded.

We now spend in the US, on the average, $10,000 per pupil. Still there are claims we are failing to properly fund public education.

I repeat my previous assertion--the Bell Curve parallels educational attainment more than any postmodern effort to change policies or funding. For those who differ the burden of proof is yours. A good null hypothesis would be spending rather than intelligence determines academic achievment. If you can prove this, prepare for world wide notoriety. Many have tried but none has succeeded

N.E.Hatfield

If I remember my statistics correctly, the normal distribution curve i.e. "bell curve" may at times not be the natural distribution. Many times it can be skewed either to the right or the left. The problems arise when the data is massaged to make it fit the curve of our choice. Intellectual honesty? Not when so much is at stake. ;)

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