Your second proposition is incredibly overstated.

[W]hile again it is natural for an international organization like the IMF to consider increased global wealth a very good thing, there is no reason for any given individual to think that.

No reason? Let's start with more investment in technology and thankfulness that fewer people are starving.

[O]ur personal welfare is bound up with the welfare of our country rather than with that of the world as a whole.

Only a matter of degree. An individual's welfare is even more closely bound up with their region, family, and personal circumstances. And the welfare of jurisdictions (and on down the line) are bound up with that of the world to a degree, perhaps an increasing degree.

Would a recession in China increase the welfare of individuals in the U.S., or vice versa?

Your perception seems to be clouded by nationalism.

Becker's article, on the other hand, is excellent, though it is too bad neither of you mentioned the (local and global) impact of migration on wealth and equality (the chapter cited punts too) and it is too bad that (as far as I can tell) no global measure of inequality among individuals is attempted (even the "Global" and regional Gini coefficients on numbered page 36 of the chapter seem to be merely averages of national coefficients -- so much for treating the economy globally).

I would like to see something written, using this data, which compares the increase of per capita GDP and inequality with the increase or decrease of political freedoms in the nations studied. This would be useful in evaluating the premise that increased economic freedom and wealth leads to an increase in political freedoms. Perhaps data from Freedom House or Human Rights Watch can be used to provide the political data.
I am personally not optimistic that there is a strong causal connection, except in the following case:
I think that the rise of some kind of bourgeoisie in a society may lead to increased political freedoms, at least for that class, unless steps are taken to involve them in government. But anecdotally, it seems that the rich don't like to be told what to do any more than anyone else, the difference being that their wealth gives them more ability to change things than the poor have. I suspect therefore that in countries that are unfree and growing economically, any revolution will come from the emerging middle-class.

the problem with your first premise is that it assumes that an overall increase to the income of the top will not adversely affect those at the middle and bottom (and it's none of their business anyway).

The fact is that an increase in buying power at the top is everyone's business. We don't live in a vacuum here. An increase in buying power of the wealthy decreases the amount of goods available to the less wealthy. When one portion of a population can purchase things at increasingly exorbitant rates, the market will adjust to reflect that increase... making goods and services less available to lower economic rungs. Health care options, housing, education, clothing, foodstuff, leisure goods, etc. all become more expensive to accommodate those who can buy.

Witness what has happened in NYC. A person gets a college education (just like their parents did) works in a necessary service industry (such as education, health care, police work, etc.) and makes $95,000 per annum. In an economy where the wealthy get progressively wealthier (and one in which the wealthy of other countries move in to provide more disposable income, as well), that person finds it increasingly difficult to buy a home and provide for their childrens' futures... requiring them to move further and further out of the area where they work or move into communities that are less desirable and whose schools may disadvantage their children.

From the point of view of a wealthy person, let them eat cake. It's the worker's problem that they became a teacher, nurse or cop. It's the worker's problem that they live where they live. Fair enough... BUT, from the worker's perspective, it represents a collapse of the social compact (a la John Locke) that society previously maintained: ie... reasonable resources in exchange for a lifetime's energy. The consequence, ultimately, is that the worker has less investment in the system, as well, which results in a decline in infrastructure. The wealthy become increasingly parasitical, eating off of the system that can only be reasonably maintained by the working middle class and working poor, insulating themselves from the impact of their existence on the whole. The middle class and poor.. now increasingly out in the cold, dissatisfied at the middle and disengaged at the bottom... provide less service and less loyalty to the system. The wealthy may not notice it all at once, because they can afford to protect themselves from the effects, but the must move decay ever upward. Ultimately, it isn't the poor that will be their undoing, but the middle class that when they no longer obey the norms of the culture, are it's undoing.

audrey: "An increase in buying power of the wealthy decreases the amount of goods available to the less wealthy. When one portion of a population can purchase things at increasingly exorbitant rates, the market will adjust to reflect that increase... making goods and services less available to lower economic rungs. Health care options, housing, education, clothing, foodstuff, leisure goods, etc. all become more expensive to accommodate those who can buy."

Bwah? If anything, increased buying power only serves to make more goods and services available, since the profitability of providing goods and services becomes more likely when there are more people able to purchase them. If what you said were true, then the Great Depression, which dramatically decreased the buying power of the richest Americans, should have been a boon to the rest of America. It clearly wasn't.

Besides, the richest people aren't in competition for the same things that the poor and middle class purchase. That the super-rich can afford to buy yachts doesn't mean that the poor have been denied the ability to purchase a yacht of their own. If anything, without there being people around who can afford to buy yachts, you won't have anyone building yachts in the first place. The super-rich also aren't trying to buy the same homes and cars, or even health care, that other people do. There is some overlap in areas such as food, but the rich don't eat more than anybody else. The price of milk doesn't go up depending on whether rich people are buying it.

It is always convenient to believe that another person's fortune hurts your own -- it lends a kind of moral authority to what is otherwise rank jealousy.

Audrey may have a few points worthy of more reflection. One is that of median housing prices in many areas being bid up to five and ten times median household incomes. In LA county, for example, median home prices are $540,000 Perhaps median household income in LA County is a bit higher then the $50k for the nation, but considering loan limits are less than three times annual income, it seems unlikely the price of post WWII bungalows could be pushed up to five or ten times household income.

Audrey also mentions a societal problem (sorry "Libertarians" and devil-take-the-hindmost advocates) I've noted in many areas; including "Silicon Valley", North Chicago, and I'm sure NYC, that even at the income level of college educated professionals of education, police, fire, non-MD healthcare and many others that they can not afford to live within reasonable driving distance of the places they ply their professions.

What's the societal cost of say the teachers setting their alarm for 5 am and being reluctant to hang around for a 5 pm parent meeting, or to attend an evening band or sports event? More "freeways? More fuel and pollution?

Audrey continues:
"requiring them to move further and further out of the area where they work or move into communities that are less desirable and whose schools may disadvantage their children."

........... Yes, Audrey sees "The Market" solution, and should comply with its rules move on to where housing prices and salaries for teachers et al are more in line. In theory NYC, San Jose, and LA will soon have to bid $200,000 to attract teachers to their pricey communities, but! it's been my experience that advocates of "The Market" solving all problems are the least willing to favor market based teacher compensation. After all "they" do these tough jobs for the lovin' of the game.

Caution though, boomer-aged women who went into teaching when it was one of the few careers open to them are now retiring in droves and adding to the current shortage of 40,000 teachers. What will it take to lure young folk with many other options open to them to enter the teaching profession? Enough to buy a home?

People like Posner make way too much money. They should increase net happiness by giving to poor folks like me.

Jack: A little bit of Hazlitt's crucial lesson would be useful here, since the whole notion that higher real estate prices are bad necessitates a very selective look at who is being affected. It's the same myopia that infects the view of D.C.'s recent gentrification as a bad thing.

If your local real estate prices are rising, that's good news for current residents who can reap the gain in equity. It's also good news in that it means that people want to live in that area, which generally translates into the area being a nicer place to live. There will be more property taxes available for public amenities like the schools, transportation, etc. When prices are falling (aside from funding problems like we're experiencing now), that means people don't want to live there, meaning the place is not very nice, and less money from taxes for public goods. Sure, the place is more affordable, but that's not always a good thing. The same house in McLean, VA will cost about twice as much as if it were in Baltimore, MD, but that doesn't mean Baltimore is where you'd rather live.

Is there any area that wants to keep prices down? Lower prices means that local owners aren't getting a good investment on their home -- why hurt them? Lower prices mean a worse/inconvenient neighborhood -- who wants that? It seems pretty obvious to me that when comparing the consequences to all groups, that we're all much better off overall to have prices rise than fall.

Audrey and Jack--

FYIW, teachers, firemen and police are government employees, and their employers are monopsonists in their particular districts. Ditto with nurses in rural areas where there is only one hospital. Therefore, salaries are artificially low because of lack of competing employers.

School choice should, among other things, raise teachers' incomes by increasing competition for their services.

"... There will be more property taxes available for public amenities like the schools, transportation, etc. ..."

Unfortunately, the fraction of taxes which come from land rent is negligible. What's more likely to happen is that public goods get funded from taxation of labor or capital goods; the expected benefits are capitalized into increased land values, and this incents wasteful speculation and contrived scarcity of land. See Mason Gaffney, "Land Speculation as an Obstacle to Ideal Allocation of Land"

James: I don't make a value judgement of high R/E prices being good or bad. Instead, I point out, the obvious societal problem of crucial support employees such as teachers, firemen, police, and Walmart employees being priced out of the entire community in which they serve.

Here in Anchorage we benefit from most teachers living within 15 mins of the school, thus returning for a parent meeting, school event, an early "zero hour" class, or even a Sat planning or training session is not the extra burden it would be if home were a 45 min slog through road rage inciting traffic. I guess we are discussing something called "community" for which "the market" cares not or is very slow to respond. And, of course the market based solution is that of paying teachers, police and others in keeping with the regional cost of living so they too can be participants and beneficiaries of the nice areas they serve. But! the increased costs will not be welcomed by the taxpayers, regardless of the price of their home.

Couple of thoughts on "the benefits of higher R/E prices" First, as my home increases in price (but not value) about all I could do with my windfall is use it to pay a windfall for my neighbor's house, though I suppose eventually I could cash out and take my gleanings to Mexico or Thailand.

Secondly assuming I'm that teacher or other median income earner there's no handy source for the increased property tax bill; no matter how nice the amenities might be.

David: The monopsony effect you mention was even tighter back when the women who make up much of today's teaching staff had few other careers open to them and the cost of going to teaching college was much lower than it is today --- even after adjusting for inflation.

So it's yet more predictable, given many other options, fewer will sign up for teaching school and make their way out of being victims of artificially low pay. Even today, I see many who drop out of teaching after a few years for the need of a salary to raise their family.

As for "school choice" if that means a fixed government funded voucher to be cashed at religious or other "private" schools I do not see any mechanism there to increase teacher pay.

You people may be the first to have your houses burned when the next round of riots starts. Some of you sound like you think you are at the Yale Club with your sailing buddies. Poor, marginalized people read this too you know.

Posner and Becker want to talk in stats and quintiles, people who disagree with them should tell stories of personal deprivation. Teachers who can't afford houses is good. But it won't work. People who spew variations of "rising water raises all ships" have already abandoned ordinary empathy. For instance:

"That the super-rich can afford to buy yachts doesn't mean that the poor have been denied the ability to purchase a yacht of their own."

Yes it does. Property rights are absolute and there are a limited supply of yachts. But the point isn't who gets a yacht, the point is no one should get a yacht. Super-luxury goods waste resources, because "trickle-down" is less efficient than direct subsidy of essential services. But of course you don't believe that, because you would rather listen to that actor guy who was President and beat the scary Russians with their socialized health care. ooooh.

My wife is a teacher, she doesn't make enough to live. I am a lawyer so we get by. (Still can't afford a house in LA though.) She works because she loves kids. The school district exploits this non-economic motivation by underpaying her. We both know this, but she still loves to teach music to kids. Meanwhile I provide a luxury service (expert counsel) to the super-rich, and envy her convictions. My extra money doesn't trickle down, it goes to Sallie Mae to pay back extortionary tuition at law school, and is promptly invested offshore in massive non-producing capital pools. Someone at Sallie Mae probably skims enough in bonuses and stock options to buy a yacht. Maybe he hires me to draw up title documents. And my wife keeps teaching your kids to sing old protest songs for $20 an hour.

When Becker and Posner talk about "the poorest" in the context of global inequality they mean people who live on a dollar a day and eat refuse sometimes. My class anger is not placated by learning they now make $2 a day.

Then we get this gem:

"The poor, unless consumed by envy, are not made better off by policies that leave them as poor (or make them even poorer) but reduce the incomes of the rich."

The poor are consumed by hunger. Those with enough to eat and think comfortably are consumed by a cross between pity and anger. That despite the almost non-existent marginal utility to you of whatever policy tax you are opposing, you cannot summon the good will and generous spirit of charity and take out $10 for the team. That you demand the freedom to choose not to be charitable rather than let expert civil servants try and improve impoverished lives. That you trumpet classical liberalism as if it is no longer contestable.

Inequality is bad because it reflects a decline in generosity, empathy, and compassion. Scenes that would have provoked our ancestors to charity now only provoke rationalizations and statistical obfuscation.

Sad.

Jack: "I don't make a value judgement of high R/E prices being good or bad. Instead, I point out, the obvious societal problem of crucial support employees such as teachers, firemen, police, and Walmart employees being priced out of the entire community in which they serve."

If people can afford to move into an area like that, they will also be able to afford to pay increased rates for teachers, firemen, and what have you, and pay for the extra time needed if necessary (maybe even private tutors, or boarding schools). Why are we suddenly concerned about the ability of the rich to pay for things?

Corey is killing me, here. First we get the logic-laden, "You people may be the first to have your houses burned when the next round of riots starts." Very nice! But it gets better: "Posner and Becker want to talk in stats and quintiles, people who disagree with them should tell stories of personal deprivation." Ah, but the plural of anecdote is not data. Anecdotes ask that we ignore the greater good in pursuit of one person's good -- hardly egalitarian, I must say.

This was the killer for me, though: "But the point isn't who gets a yacht, the point is no one should get a yacht." Oh really? Yachts shouldn't exist? And why is that -- because being rich enough to buy a yacht is a moral offense? Please. There is not a finite amount of wealth. Wealth is always being created. Those who create the most wealth get rich. We should reward that. In fact, if there were not yachts to buy (along with other luxuries), people would be less inclined to try to produce more wealth. Less wealth produced means less wealth for everyone, and we're all worse off. People who can afford luxuries create markets for the sale of those luxuries, meaning jobs for the creation of luxuries. It's not like the people who build yachts are all super-rich themselves. You'd rather put those people out of work rather than let some rich person have a yacht? Does it really steam you that much?

Your overemphasis on white-collar crime leads me to guess that you view most wealth-accumulation as the result of criminality, when the vast, vast majority of the rich are law-abiding and simply successful -- or do you think it's impossible to be successful without somehow breaking the rules?

"The poor are consumed by hunger." The poor in America tend to be obese. The people who live on $2/day aren't living here, they are living in countries with wrecked economies and oppressive regimes. The poor in America have TVs, DVDs, indoor plumbing and air conditioning. Most people in Cambodia would give anything to be poor in America. I've been to Cambodia, I've seen real poverty. I've seen the river people living in rude huts on stilts, owning little more than the clothes on their backs and whatever they happened to catch nearby, eating just about anything. Jobs, education, even cash -- these were foreign things to them. You can't even compare their plight to that of the poor in America. You can wave your compassion/empathy/generosity flag all day long, but the fact remains that income inequality in America is worth every penny of not being like the river people in Cambodia. There's an anecdote you can stick with.

Comments like the last one make it worthwhile to remember that at some point enough poor people in Cambodia rallied behind a few crazy criminal types and killed all the rich people. Their anger at their abject poverty was such that they went on to cut their noses to spite their faces, as well. Saying to the poor in America "you guys have got it good, look at the people in Cambodia", from your yacht, is callous and is not an argument anyway...

More to the point, Becker provocatively writes:

"Taxpayer-subsidized tuition for students at Berkeley does not increase income equality in the United States.)"

I think this is disingeneous and ideological. There is ample evidence that public (ie, taxpayer subsidized) education has had over a long period of time positive effects on total income, productivity AND reduction of income inequality, in a number of countries.

Moreover, given that income inequality exists, and will not go away, talking about decrease in inequality is meaningful, while talking of the "increase in equality" is disingeneous: advocating income equality is not the same as advocating reduced inequality, and in any case equality cannot "increase": it either exists or it doesn't.

Posner continues:

"...notice that in the United States income inequality has been growing even though educational opportunities are abundant, with more than a third of the population obtaining some college education; most of the rest could obtain it as well if they thought they would benefit from it."

More than a third is not a very large percentage. The percentage of the poor in the US is no larger than a third of the population, and of the really destitute even lower. But to claim that " most of the rest could obtain it as well " is today's version of let them eat cake: a completely cavalier statement, with no backing by evidence, that shows an amazing lack of empathy.

James:

Jack: "I don't make a value judgement of high R/E prices being good or bad. Instead, I point out, the obvious societal problem of crucial support employees such as teachers, firemen, police, and Walmart employees being priced out of the entire community in which they serve."

James replies:

If people can afford to move into an area like that, they will also be able to afford to pay increased rates for teachers, firemen, and what have you, and pay for the extra time needed if necessary (maybe even private tutors, or boarding schools). Why are we suddenly concerned about the ability of the rich to pay for things?

........ and Jack somewhat agrees. I guess the sum of my couple of posts indicates that I think the coming teacher shortage will result in their being paid enough, to at least, live in the communities in which they teach. But! there will be LOTS of whining and gnashing of teeth.

I mentioned that high R/E prices weren't much of a benefit to working folk intending to remain where they are as their windfall wouldn't buy them a better house and only resulted in their having to devote more of their income to increased property taxes, insurance etc. I', a bit curious about how housing prices have run up beyond the ability of median, or average, or even above average earners to buy them.

Today I stumbled onto this graph

http://www.housingbubblebust.com/Fed/GDPvsHSG.html

It depicts what I've lamented and most of us sense. Historically the total value of housing was less than that of one year's GDP, about 1983 housing prices were on par with GDP, by 2007 housing prices totaled $21 trillion by comparison to a $13.8 GDP.

Some of this makes sense as homes today are larger than in 1983 or earlier, still as the price is so rapidly outpacing GDP it says something, as Corey does, about housing prices being bid up beyond most people's ability to buy them.. ie, median or average income will not qualify a family for a median or average home. Can this work? Or are we teed up for a serious "correction" in home prices? I don't know, but feel the ground moving under my feet as just before and earthquake.

BTW I kinda liked Corey's spirited rant that distills down to the opening lines of Buffalo Springfield's

"There's something happening here.
What it is ain't exactly clear.

The song ends with:

"Paranoia strikes deep:
Into your life it will creep.
It starts when you're always afraid.
You step out of line, the man come and take you away."

but that's about another topic and tactic of our day.

There are lots of holes in his individual arguments (sorry counselor) but overall, after 50 years of productivity gains, if a hardworking, well-placed attorney and a teacher are living little better, if at all, than a similar couple of the 60's, I too wonder what is happening here.

Vasilis: Yes, Posner should well understand that college is a product and as the costs have outrun "normal" inflation that if he believes in "supply and demand" a lower percentage of kids will be there regardless of the lifetime benefits of a college education, to the great disadvantage of our nation. Perhaps it's legend but there is still lots of praise for the advantages to all of the GI Bill and opening up our formerly clique-ish Ivy colleges to rank and file returning GI's.

As for embracing inequality, I'm reminded of the post WWII failure of the UK as those at the bottom had to little incentive to work, while the managerial class did nothing because their upper class positions were secure anyway. I'd suggest any nation hoping to remain democratic be very concerned about turning in to a nation of lords and serfs.

Posner continues:

"...notice that in the United States income inequality has been growing even though educational opportunities are abundant, with more than a third of the population obtaining some college education; most of the rest could obtain it as well if they thought they would benefit from it."

"My wife is a teacher, she doesn't make enough to live."

LOL. Corey is still Corey. Mr. Self Righteous Marxist corporate lawyer! Didn't they teach you any tricks of persuasion in law school. You know, like avoiding absurd hyperbole.

Living right while thinking left, indeed.

Vasilis: Of course, the people of Cambodia were stuck under a totalitarian system that redistributed all the wealth to the favored few and left everyone else out to dry. There, income inequality was enforced at the barrel of a gun, it was not the result of open competition in a free market where property rights were equally enforced.

And don't talk to me about yachts. I don't own one, and can't afford one. But I don't sit around grousing that others more successful than me can buy them.

Jack: You touched on a good point, that economic inequality is not necessarily a bad thing if there is economic mobility. If a person on the bottom rung of the economic ladder, making minimum wage, has the chance for advancement, then who cares what the CEO makes? The problem is when the fry cooks and janitors can never advance. The studies on this all show that America has a very high rate of economic mobility -- both that people in the lowest quintile are able to advance, and that people in the highest quintile are liable to fall.

As for home prices, there is already a correction going on. But again, the negative aspects of declining home prices are always far worse than the alternative.

James:

I am talking about the situation *before* the communists -- the one that led to the communists coming to power and the Killing Fields. And, as crazy and criminal as the Cambodian communist dictators were, they didn't seem to be into personal enrichment (not that this justifies anything, it's just an observation)

As for economic mobility: take a look at recent evidence. Economic mobility in the US in the last 30 years is quite limited. (Krugman has written about this)

//And don't talk to me about yachts. I don't own one, and can't afford one. But I don't sit around grousing that others more successful than me can buy them.//

But other people who are unsuccessful in life do exactly that; it's a psychological fact that people feel jealousy, they compare themselves with others, yes we are homo sapien and not homo economicus. The pleasure of gaining prosperity at 2% a year can, and often is, more than compensated for by the pain of watching the Jones' grow at 10% a year.
Let's keep in mind that what we're after here is not just greater and greater amounts of wealth for its own sake, but for the sake of the greater amounts of happiness or utility or whatever desirable psychological conditions that increased wealth creates. Often happiness and growth become disattached. Economic growth doesn't bring increased happiness when the growth is concentrated in status goods for the rich and middle class that confer zero sum or negative sum benefit to society as a whole.
Our society has gotten no happier on average than in the 1970s even though real output has doubled. As much as we'd like to dismiss envy or status consciousness as too vague to be of importance in economics and public policy, it is there nontheless and should be a factor in deciding tradeoffs between equality and growth.

James Thanks for the comments.

Newer studies are showing that upward mobility in the US is much less than in the past and that Germany, for one, now has a higher rate of upward mobility. A healthy level of upward mobility would result in lower rates of poverty and rising wages for those of median wages and below.

Corrections, I suppose, are neutral in terms of negative and positive results, but in America when the tide recedes, ha! it's true that a lot of slippery and not so pretty things are revealed.

"because being rich enough to buy a yacht is a moral offense?"

I think it should be fairly obvious that I think the answer is yes. Actually, I would restate... being rich is not necessarily a moral offense, that would depend on how the riches were acquired. However, buying a yacht for personal use is always both inefficient and morally wrong.

Imagine someone dressed in the finest custom tailored suit, standing over a prone homeless woman and taunting her with a bundle of $100 bills. You wouldn't have any problem morally condemning that, even in utilitarianland, which I will not stipulate that we are confined to.

Posner, and many of you here, seem to think that anger about inequality is based on jealousy. No, people get angry because they understand that the marginal utility of that one extra dollar decreases to almost zero for rich people, and yet, they watch rich people refusing to give that dollar to someone for whom it would mean so much. Greed and hoarding present an allocation problem. At the level of yachts, the misuse of resources gets so obvious that we can invoke moral outrage. This is intuitively easy to grasp even for the uneducated who couldn't state it in so many words.

There are lots of counter-justifications for wealth inequality, after all, the rich can afford to pay people to think them up. Trickle-down, invisible hand, "the-superrich-need-yachts-on-which-to-further-increase-their-productivity," the complete works of John Locke... we've seen them all in this comment thread.

"Mr. Self Righteous Marxist corporate lawyer!"

Close enough. I went to a state law school and still had to borrow $120K. For a variety of reasons, I am 32 years old and have no assets. I take public transit to work but I hope to purchase a car. My life is very rich and enjoyable, but I guarantee my economic footprint is, and will continue to be, smaller than yours.

I am not going to apologise for taking a job so that I could repay my debts, finally get married to my fiance, own a car again, have health insurance again, and maybe even begin save for a house.

If you dislike me, you will be encouraged to know this: Beat-down three-room bungalows in my neighborhood sell for $600,000, and knowing my politics you can guess that I won't be able to keep my job long enough to ever afford that. I will pay more dollars in RENT this year than the full purchase price of my father's first home--where I was born. WITHOUT adjusting for inflation.

"Didn't they teach you any tricks of persuasion in law school. You know, like avoiding absurd hyperbole."

Oh I learned law school tricks quite well. The problem with that particular discourse is that we all know where it ends up. Why should I confine my rhetoric to an inately conservative mode of approaching problems, when my goal is to shake open minds? People still write and respond to songs and poems, even though law-people find them quaint and non-rational. We shall overcome!

And by the way, I wasn't exaggerating, my wife never has made enough as a teacher to live on her own. I can give you numbers for you to means test if you want to be pedantic about it.

As for the rest of it, we are all dealing in ideologies here. If you want to count dollars, yours wins, if you count heads, mine does. One person one vote I say then.

"Ah, but the plural of anecdote is not data. Anecdotes ask that we ignore the greater good in pursuit of one person's good -- hardly egalitarian, I must say."

Anecdotes guarantee that at least one real person's concerns are considered deeply whilst forming a conception of the greater good -- which otherwise might be based only on a push poll.

Data is inherently conservative. It reports on what IS, and policies numerically anchored to what is will inevitably replicate it. (See, e.g. critique by MIT's Nicholas Negroponte as discussed in Ian Ayres new book)

Vasilis: "And, as crazy and criminal as the Cambodian communist dictators were, they didn't seem to be into personal enrichment[.]"

That's because power is always more appealing than riches. A person with power can always get riches as it suits them. A person with riches has no inherent power at all. But to get to the real point, it's foolish to talk about the "poor" in America when it's easy to see that our "poor" are quite different from the truly poor in other nations. As anon points out, and books like "The Progress Paradox" by Gregg Easterbrook do as well, the problem of jealousy often obscures a lucid and rational appraisal of the true state of things. Give a person air conditioning and they'll be better off, but they'll not feel better off if their neighbor has air conditioning and a television. It's the main conceit that folks like Corey use to whip people into thinking that their life sucks and they have no hope of getting anywhere when in fact their daily condition is far better than their ancestors lived through, and is getting better all the time. That's why Corey hates data -- a logical look at "what IS" almost always contradicts his rhetorical nonsense on how he thinks things are. "Shake open minds" indeed.

Jack: "Newer studies are showing that upward mobility in the US is much less than in the past and that Germany, for one, now has a higher rate of upward mobility. A healthy level of upward mobility would result in lower rates of poverty and rising wages for those of median wages and below."

Actually, the studies I've seen, at least as of 2004 and thereabouts, showed that economic mobility in America has not been increasing, and that it is "unexceptional." This doesn't mean that America's economic mobility is low, though pundits like to make it seem like it is.

More economic mobility will not really reduce poverty, since poverty itself is a slippery scale that is always redefined. People are so fixated on "income inequality" and income as a measure of poverty when there are people out there with little or no income and huge amounts of assets (a lot of retired folk, for example) that are now "living in poverty." Other people living in poverty: college students. We all know that these kids aren't what people think of when they think of the impoverished. After all, they'll get jobs after they graduate. But for now, they're poor.

Corey: "Imagine someone dressed in the finest custom tailored suit, standing over a prone homeless woman and taunting her with a bundle of $100 bills."

My goodness...THIS is your view of the rich? For crying out loud, no wonder you're a bitter mess. It reminds me of those yokels who think that every gay man dresses in a pink tutu and lisps.

But let's get to the real point: your thought that yachts are a clear "misuse of resources." I suppose by that measure we can lump in all sorts of luxuries into that category, from fine clothing and jewelry to Maseratis and mansions. Morally, it seems, you believe that those resources should go to some other purpose instead. Problem is, they wouldn't, even in your best redistributive scheme. You can't redistribute resources that aren't produced. The reason why there are luxuries is because certain people produce enough wealth from their hard work and/or entrepreneurship that they have discretionary income available for luxuries. Take luxuries away, and what else can they do with their wealth? Your answer: give it to the government or to the poor. But who wants to work hard and produce lots of value only to have the fruit of that labor taken away? What's the incentive? There is none. You have to reward production is order for there to be production. By failing to do this, you'll only decrease production and make everyone poorer, including the already-poor. Good job.

Corey: "I went to a state law school and still had to borrow $120K. For a variety of reasons, I am 32 years old and have no assets. I take public transit to work but I hope to purchase a car. My life is very rich and enjoyable, but I guarantee my economic footprint is, and will continue to be, smaller than yours."

Of course it will be -- you're 32 years old, for crying out loud! You've barely begun your career. What, you expect to have a few hundred thousand socked away already? Unless you have been granted an inheritance (and I suppose that kind of thing really steams your noodle as well), you're not supposed to be making huge amounts of money and amassing huge piles of assets at 32 -- unless you're the founder of Google or working at a top law firm or something. Unless you intentionally hamstring yourself (like by insisting on being a public defender), you'll be making great money before 40, big money by 50, and you'll ride that the rest of the way to your death. And that's even if you're a relatively bad lawyer. Relax.

Really, a lawyer complaining about money! Did it surprise you that even in this profession you'd have to pay some dues before the money starts rolling in?

Yeah yeah yeah, incentive theory... yay. One hole... ALL real innovation and hard work is done without a statistically significant chance at becoming super-rich. People actually work for a paycheck and personal satisfaction, windfalls are rare. Another hole... the people who become super-rich are almost exclusively not the same people that cause corresponding sea-changes in productive science, technology, or social services. (Unless you think networking at the Yale Club, trading derivatives from a desk, and hedge-funding are the highest ends of human existence.) Another hole... most if not all of the increased productivity since the 1960s is attributable to advances in computer and other technologies that actually made work EASIER. It is fair to say that work back in 1968 when the top tax rate was 70% was physically and mentally harder than now.

Paul Allen didn't do whatever you think Paul Allen did because he was incentivized by the possibility of owning a fleet of yachts.

If no one produced yachts then more people would be available to produce medicine. The fact that luxury goods drive production and investment does not disprove my assertion that other goods would drive production and investment better. Health and longevity has the virtue of being an end that workers benefit from both directly and via paychecks. What about incentivizing workers by organizing them around shared goals of improving life for all? The desire to assign incentives only at the top of the hierarchy is as bare an ideology as is my ideology of downward redistribution. How do you keep your rewards from becoming unjust and excessive?

"Did it surprise you that even in this profession you'd have to pay some dues before the money starts rolling in?"

Look, I'm 32, this is a second career, there are chips in your computer I helped design. I was not one of the lucky few who cashed out before the tech bubble burst. Oh well. I am getting exactly what I expected and signed up for in my new career. If I was only out to accumulate, engineering and stock options was a better gig.

I did not ask for riches or for money to roll in, don't assume my goals for me. I stated my goals very clearly. I also noted that I pay more in rent than my father paid for his first house. I am NOT better off than my father or grandfathers. If by ancestors you mean German-Russian farmers near the Volga river in the 1800s, then sure, I am better off than them.

I am fine with being middle class, it allows me to maintain my moral self-confidence given my view that excessive possession corrupts. I do think everyone has a right to own a home for their family. What is keeping me from doing so is others asserting a right to have their home be worth nearly a million dollars. The last 10 years of my life my income has continually increased (with a break for law school) but yet, the price of homes has increased even faster. I do not have to be jealous to be frustrated at that.

"My goodness...THIS is your view of the rich?"

No, it was a made up example to demonstrate that it is possible to have a moral reaction to the way people use their money. You are consistently mistaking "you are misuing your money" for "I want your money."

And the truly ironic thing is, that all this time while I have been chasing a home and the quiet modest freedom of home ownership that I remember from my childhood, I have been constantly accused of hypocrisy for continuing to "sell out" to higher and higher bidders.

I am not asking for sympathy, but am merely explaining how a "Self Righteous Marxist corporate lawyer" can exist.

Corey: "Yeah yeah yeah, incentive theory... yay. One hole... ALL real innovation and hard work is done without a statistically significant chance at becoming super-rich."

Is that what you tell yourself to excuse personal laziness and failure? I mean, really now. If you think Sam Walton, Warren Buffett, and Bill Gates were lazy bums with nary an original idea to offer, you're just deluding yourself. Besides, it's not all about becoming "super-rich," as I can be merely "rich" and still get plenty of luxuries. I can even be "middle-class" and afford things at Tiffany's. The more productive I am, the more I make, the more luxuries I can afford. That is a good thing, to give me incentive. The incentives thus do NOT only exist for the very few, as you mistakenly argue. The super-rich only inform me as to how much is truly possible. The fact that there is a chance is enough. Take lottery tickets, for example.

Corey: "Another hole... the people who become super-rich are almost exclusively not the same people that cause corresponding sea-changes in productive science, technology, or social services."

Let me guess: only the things Corey finds valuable are the things that it is morally acceptable for someone to get rich at. One thing I'm sure infuriates Corey on a daily basis is that the people around him value goods and services far differently than he does. What was that he was saying about counting heads earlier?

Corey: "Another hole... most if not all of the increased productivity since the 1960s is attributable to advances in computer and other technologies that actually made work EASIER."

So? I'm saying that taking away luxuries would reduce productivity. I haven't claimed that luxuries will ensure constantly rising productivity.

Corey: "If no one produced yachts then more people would be available to produce medicine."

On what basis? Guys who build boats are physical laborers. Different skill set. At best you could argue that we'd be better off with fewer plastic surgeons and more regular doctors, except once again we're dealing with How Corey Values Things rather than How The World Values Things.

Corey: "The fact that luxury goods drive production and investment does not disprove my assertion that other goods would drive production and investment better."

People always think that, and governments then try to make it happen, and they always fail. Haven't you learned? When a bunch of Coreys sit around deciding what society should be allowed to have, society fights back by sitting on its hands.

As for the bit that possession corrupts -- the power you would give to yourself or the government to control what is produced and what people should be allowed to have is far more corrupting than any luxury ever created. And besides, if you think owning something nice will corrupt you, you must have a really low opinion of your own self-control.

Corey: "I do think everyone has a right to own a home for their family. What is keeping me from doing so is others asserting a right to have their home be worth nearly a million dollars."

Wait, I have a right to have my home worth a million dollars? Sign me up! Give me a million dollars! Oh, wait...that's not quite how it works. Your frustration leads to these mistakes. You have to step back and take a breath. Look at the bigger picture, the "data" if you will. It's not all about your frustration. You happen to be on one of the most profitable career paths in America. That you're complaining about it boggles the mind.

Corey: "And the truly ironic thing is, that all this time while I have been chasing a home and the quiet modest freedom of home ownership that I remember from my childhood, I have been constantly accused of hypocrisy for continuing to 'sell out' to higher and higher bidders."

Get new friends. Seriously.

Corey makes some good points, but I think, for the jury, that instead of counting million buck yachts at the Marina Del Ray that the following sums up the situation better"

"The United States is one of the richest countries in the world (2nd behind Kuwait), and in 2000, the mean wealth was $144,000 per person.[6] In the United States at the end of 2001, 10% of the population owned 71% of the wealth, and the top 1% controlled 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth."

Followed by this very nice chart:

http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States

In short, that despite the wealth of our country nearly half of us are grubbing for but 1% of that wealth with (by definition) typically only median income (one third of average income) to deploy.

Perhaps that explains much of the reason that the worn out bungalows of his, and my own, parents command ten years of working folks income as compared to just two years that of our working class parents in the 60's.

But in the short run Corey keep your powder dry, while standing still paying rent, you're probably doing much better in terms of asset building than those lip deep in debt in a declining housing market that has outrun the ability of prospective buyers to buy them.) Consider that sans appreciation they are paying $4,000 plus interest taxes and substantial maintenance. This pull back will get worse before it gets better especially as bankers are reminded of their responsibility to their lenders.

Another good point of Corey's is that as cutthroat "competition" seems the watch word of the day, truth is capitalism is far more dependent on cooperative efforts to add value by one's labors and creativity than beating the other dog to the bone. Or so it seems from here......... Jack

"People always think that, and governments then try to make it happen, and they always fail. Haven't you learned?"

Yeah, because our government is doing a real bang up job right now right? People haven't been this dissatisfied since Nixon left office. I call failure.

"Guys who build boats are physical laborers. Different skill set."

When I call for redistribution of production then I am of course anticipating redistribution of job titles. That's why I support this thing called education.

"How The World Values Things."

You mean the market right? I don't listen to invisible hands or voices. Market preferences are dominated by the rich. One person one vote. :)

"The more productive I am, the more I make, the more luxuries I can afford. That is a good thing, to give me incentive. "

You must know that this is not true, right? Especially in the US. The salaries of CEOs have been shown time and again to not be correlated with anything except the movement of the stars in the sky, and certainly not with performance or productivity. There are shareholders howling at this for the past at least five years. Moreover, the reduction of taxation on assets (stocks etc, including the carry that hedge funds make -- which low level of taxation even Warren Buffet considers a bad idea) means you get rich by being rich, and much more so today than 20 years ago. This is an option not open to productive workers of any class.

Vasilis: CEOs appear overpriced because they don't "produce" in the same way as other workers, but there is no doubt that an excellent CEO can make millions, if not billions, of dollars in difference. Also, CEOs often face noncompetition and nondisclosure restrictions that can make it hard for them to get a similar job at another business. The CEO naturally requests more money in exchange.

Jack: No, you're not "grubbing" for just one percent of the wealth. A person can have good income and little wealth. Are we supposed to worry about them because they have leveraged their net worth for entrepreneurial means? A person can be like Corey -- just starting out, not worried about wealth accumulation while building a career. The data is much more complicated than you think it is.

And you're right -- capitalism depends on cooperation, even between companies. Difference is, capitalism's cooperation is voluntary, not forced.

Corey: I didn't think you'd be able to come up with a government that does redistribute wealth well. That's because there isn't one. As for education, you can't mandate that everyone is going to be good at being a doctor, or a lawyer, or engineer. Some people are good at blue collar stuff. You'd like to mold people to fit your wants and needs, but it doesn't work that way. It's one thing that parents learn very quickly when raising children.

As for markets being dominated by the rich, the simple answer is: only in your head, dude. Aside from the really high-end items that you already disdain, you're the one setting the prices, not them. Think about it. It's not like each rich person eats three hundred times more food than you do.

James good comments, thanks, though I think you gloss over the reality of increasing inequality which most seem to agree is not a good thing for a still semi-functioning democracy; including Greenspan.

Vasilis: CEOs appear overpriced because they don't "produce" in the same way as other workers, but there is no doubt that an excellent CEO can make millions, if not billions, of dollars in difference.

........ Indeed they do appear overpriced by nearly any measure perhaps that of the 2,000% increase over 25 years, or going from an already high (compared to other nations) of 80 times worker pay to over 500 times. In the mature industries, most are employed, very few make billions of difference and certainly not in the area of increased productivity. Would Blue Cross be a fine example? Any genius of new efficiencies? Any creative new products?

...... If CEO's worthy of their gleanings do make billions of difference surely it's high time for some of it to "trickle down" to the team players of lesser salaries whose productivity and contribution is also difficult to measure, assuming those "billions" come from something other than squeezing more widgets out of a fixed labor cost. I'm reminded that Volvo was built on a commitment of no one in the company earning more than ten times that of the least. Such is not the case in our "beleaguered" auto industry and Ford is finding their boutique marques of Volvo, Jag etc "unprofitable" and perhaps to be sold off.

Employees too face high risks of mid-life unemployment as we've seen with waves of downsizing, tech and automation advances, and outsourcing. In more than one company the entire work force' last days were spent teaching new Chinese owners how to operate the, soon to be shipped, equipment. No "non-compete" of course just their specialty no longer exists; finishing up unskilled labor is the pot metal parachute for all too many.

Jack: No, you're not "grubbing" for just one percent of the wealth. A person can have good income and little wealth. Are we supposed to worry about them because they have leveraged their net worth for entrepreneurial means?

........ "Worry?" Perhaps. As wealth exacts a rent it's a part of the reason for laments such as Corey's that the "ends don't meet" even for a couple further up in both education and earning capacity than most. As 40% of us enter the "silent auction" to find 99% has already been sold, we've the Hobbs choice of walking away empty-handed or grubbing at inflated prices for the few remnants.

While we give lip service to a meritocracy offering upward mobility to all the truth is rapidly becoming very different.

Items: Flat wages at median level and below. The sharp increases in wages in the topmost rungs. The yet higher rate of consolidation of wealth at the top. And even then, the Walmart heirs using their extreme wealth to buy a presidential campaign against the "death tax" that their own inherited fortunes will not be lessened in passing to their indolent heirs such that they too can enjoy undue influence over the remnants of our democracy.

Worry? Yeah, when this country is divvied up to lords and serfs there's no new frontier in which to try again.

James: "CEOs appear overpriced because they don't "produce" in the same way as other workers, but there is no doubt that an excellent CEO can make millions, if not billions, of dollars in difference. Also, CEOs often face noncompetition and nondisclosure restrictions that can make it hard for them to get a similar job at another business. The CEO naturally requests more money in exchange."

This is out of step with currently research results and current opinion of experts in corporate compensation. Read anything except the WSJ, including Financial Times, the International Herald Tribune, the financial pages of the NYT, for scores of articles on the topic. This explanation doesn't fly any more.

Vasilis: I think the common consensus is that CEOs are overpriced, but that doesn't mean that CEOs still won't be able to command such a price from those who think it's too much. Why? Because companies compete with each other to land CEOs, just like law firms compete with each other to land the choicest associates, which is another area where people think that businesses are paying far more than they should. While a given first-year associate fresh from a clerkship at the U.S. Supreme Court is a rare bird and usually of exceptional ability, they are rarely, if ever, worth the $200K+ that big firms are willing to pay them. The firms even know this, but pay anyway, because if one firm lowers their offer then the other firms may refuse to lower theirs to ensure that they get the associates and the more reasonably-priced firm doesn't. And while on average that would seem like a good deal for the lower-priced firm, losing those associates may mean a loss of cachet or influence, and will mean missing out on those rare associates that are actually worth the price (or perhaps far more).

Corporations not willing to match the bidding wars over the "best" CEOs may be better off in the long term, but they know that by missing out on those CEOs, they are taking a chance in reduced performance that could make a lot of difference. Jack may think that there's not much difference to be had, but CEOs like Lee Iacocca (who created the whole Lean program of efficiency) have indeed made billions of dollars in difference. CEOs that grow market opportunities and/or make the business more efficient can easily be, in big companies, worth the price.

Jack: Part of the problem is that your argument makes assumptions that simply don't pan out. There is no "silent auction where 99% has already been sold." From food to cars to houses and more, there is more out there to be bought than ever. The very notion that people can't find stuff available for sale is patently ridiculous. The issue is only whether a buyer can afford the wares, and this is an issue of credit for those with little liquid assets for purchasing. A person doesn't have to be rich to have good credit and be able to get decent mortgage rates. When people, high income or not, screw up their credit, it makes ownership harder. The problem is when people adopt the attitude of "who cares, I'll never be able to afford anything in this capitalist world" and blow their credit.

Further, if money bought political power, we would have had President Steve Forbes for a while now. Doesn't work that way. And besides, opposition to the death tax has strength not just because the Waltons might want it. There are serious policy arguments to be made in its favor. Dismissing it as merely a gambit for the wealthy to champion is wrongheaded, to say the least.

I think Posner's first point, that increased income inequality is not "bad," is not quite correct. Indeed, he himself mentions a (relatively extreme) scenario where he admits income inequality would be bad. I think generally, the consenses would be that really high levels of income inequality are bad, but not as bad as overall increases in living standards are good.

I would suggest the largest negative outcomes over rising inequality are essentially the behaviours that it creates. Those at the bottom generally feel resentment and envy of those at the top. Those on top use their money in "rent-seeking" manners (e.g. hedge fund tax rates at 15%) which creates barriers to entry.

The end result will generally be an unfair society regardless of how the inequality starts. This scenario will play out even if both groups are moving up in wealth at different rates, as comparative wealth is a more desirable item than absolute wealth. Eventually the policies sponsored by the rich few will adversely affect the lower brackets leading to justified resentment and hostility.

@James Merkels- In a society where everyone is in relatively similar financial strate, the death tax is immaterial. However, when there are disparities, it's potential to amplify the income gap is problematic to say the least.

The death tax has nothing to do with income.

The simple fact that people have different abilities and skills mandates unequal outcomes. It would actually be far more unfair to mandate income equality than to allow doctors to make more than fry cooks. The only problem, it seems, is that some people think that income inequality should be cabined to some extent so that those of lower income won't get too pissed at those with more income. But this is a self-serving argument, as those who allege such dissatisfaction are the same people who try to gin up that dissatisfaction with neo-socialist theory.

Frankly, while leftists tsk-tsk-tsk about income inequality, the general American public doesn't really care. If they were really angry about it, they'd be picketing Gates' house, protesting Trump's projects, and booing celebrities like Oprah and movie stars with their million-dollar movie deals. But they don't. The dream is not to bring the rich down, but for people to find a way to become rich. That's why reality shows are so popular. And it's why the jealousy that spills forth from folks like Corey seems so out of place in the American discourse.