Cafe Hayek - Latest Comments in Let's Go Googling

Re: Let's Go Googling

JohnDewey — Fri, 13 Oct 2006 01:27:10 -0000

nicole shore: "Consider how long it takes a recent college grad to secure a job that pays a liveable wage"

Here's the average starting salaries for some college degrees:

engineering $51K

computer science $51K

accounting $46K

business admin/finance $40K

nursing $39K

What's not livable about these salaries?

Someone may point out that some relative or friend can't find jobs in these fields, but that's certainly not the norm. These graduates are still in high demand.

Re: Let's Go Googling

David — Thu, 12 Oct 2006 15:38:31 -0000

Sorry for the lapse, Russ. I meant George Mason, of course. Your president doesn't know where my country is, so let's call it even. I also meant distinguished from my own standards, which I believe are higher than those of the "academic elite".

Adam expressed my analogy in clear terms. We are all better off. Problem with leftists is they can't stand growing inequality, even when both parties progress. The most dangerous ones would prefer to end improvement in standards of living in the name of equality. And the worst is, they are most of the time well-intended. Blame it on the lack of good economic education.

Re: Let's Go Googling

joan — Thu, 12 Oct 2006 13:11:43 -0000

Russ:

Inflation targeting could reduce wage growth by slowing down the economy when the demand for labor went over what they considered inflationary ( the "natural" rate on unemployment). This limits the upward shift in the demand for labor curve that is normal in boom periods. I doubt that is the reflection of a healthy economy because it started in the mid 70' and I think there are very few that would describe the period between 1977 and 1983 as healthy economy.

This slowing of overall wage growth combined with the downward pressure on unskilled labor by immigration and trade as well as the increased demand for skilled labor due to the high tech revolution, means that although the median is up around 25% thoes above the median are up more and those below are up less.

It is very hard to measure the income at either end of income spectrum. On the bottom because of the help the government provides to the poor, and the number of young student households/tax returns who are actually being supported by parents. On the top end the fluctutions caused by the stock market, business cycles, and changes in the tax laws make quantity measurement almost meaningless. I think comparing to gdp is a more reliable way of looking at trends than income inquality measures.

Re: Let's Go Googling

Nicole Shore — Thu, 12 Oct 2006 11:18:33 -0000

I think we will know best if things are better or worse a good distance in the future when many of us will be at the retiring point or facing an employment market that is even less friendly to older employess than it already is. Consider how long it takes a recent college grad to secure a job that pays a liveable wage, then pay off their student loan debt, and then actually be able to begin to put money away for retirement/old age. Plus, less people are getting married, which means less sharing of costs and less money to bank for the future. Not to mention how cost of living has gone up at a far greater rate than salaries. As those born in the 70's + begin to hit senior citizen age, we'll truly be able to look back and say things weren't better now compared to decades prior, because retiring will prove to be something that many of us can't fathom or afford. For now, we can only worry about what the future holds and try to build our 401 k's.

Re: Let's Go Googling

JohnDewey — Thu, 12 Oct 2006 09:32:30 -0000

Alex,

Do the studies on intergenerational wealth include real estate as well as financial assets? Consider two generations of a California family who realized large real estate gains. If we compare them with two generations of a Texas family who did not realize such gains, would that comparison show that economic mobility has decreased?

Re: Let's Go Googling

JohnDewey — Thu, 12 Oct 2006 09:22:43 -0000

alex: "The economic mobility of sons compared to their fathers fell from the seventies to the eighties, and from the eighties to the nineties"

Is this income or wealth? Does it compare lifetime income or lifetime wealth from one generation to another? If so, then it should not include any child or any parent who was still alive at the end of the nineties, correct?

What is your definition of ecoomic mobility, anyway?

Re: Let's Go Googling

JohnDewey — Thu, 12 Oct 2006 06:06:19 -0000

Alex, can you provide any data to back up your assertion about declining mobility? or at least a link that shows such data?

I don't doubt that it is difficult for someone born to the bottom quintile to rise to the top quintile. But it has been done many times.

I think mobility measurements compare the highest quintile achieved by the parent with the current quintile of the child. But is that correct?.

Here's my own situation:

My parents:

- bottom quintile in 1951 when I was born;

- moved to second quintile about 1962;

- moved to third quintile years after I left home, when my mother began working.

My household:

- started in bottom quintile;

- gradually moved up to reach top quintile by 1994.

So how would I be counted? We could say a three quintile jump if we compared my maximum with my parents' level when I left home. Or we could say a two quintile jump if we compared my maximum to theirs. But if we measured in 1983, we'd probably say no gain, because my family was in the same quintile as theirs.

Can those who study income mobility possibly know enough about lifetime incomes of parent and child? Perhaps they do, but I'd like to see evidence before accepting your assertion.

Re: Let's Go Googling

Russ Roberts — Thu, 12 Oct 2006 06:02:08 -0000

Joan,

I don't understand how inflation targeting reduces wage growth. It might reduce nominal wage growth, but it should suppress the growth in real wages.

The graph you refer to is very interesting. But one interpretation of it is that a healthy economy leads to growth in the share going to the top 10%. A stagnant economy or one in recession reduces the opportunities for wealth accumulation and therefore the share stays pretty constant or falls.

That tells you nothing about the well-being of the bottom 90%. The bottom 90% can be better off as their share falls because the overall economy is doing well. Why would you want to live in the 1930s for example, when the share going to the bottom 90% is growing?

Re: Let's Go Googling

joan — Thu, 12 Oct 2006 01:07:02 -0000

If anyone had bothered to look at the numbers and the graph I referred to, they might have noticed that they more or less agree with your estimate. If you assume the GDP deflator is correct the real gdp grew about 55% and the bottom 90% of reported incomes(which is mostly wages, most ss is not reported on tax returns) fell about 25% compared to gdp, after correcting for unreported benefits, that leaves something like 27% real wage increase. Since I was talking about income and wages, I assumed my later post would be taken that way, not as a statement about subjective reality or the existential angst one might feel when Carter was president.

I said

the bottom 90% share of gdp which was at 42% from the end of WWII to the mid 70’s, falling to a little over 30% today? Looking at this plot it is very hard to deny that their was a shift the economy in the 1970's, that accounts for part of the reason the gains we see today are not as big as those we saw in the 50's and 60's. One thing that occurs to me is that inflation targeting by the fed has suppressed wage growth....."

You said

"The Census Bureau, for instance, says that the median-earning man who works full time -- the one in the dead middle of the earnings ladder -- made slightly less last year than in 1977. It is one of the main numbers cited by those who say life isn't much better now than 30 years ago.

But Mr. Gordon's adjustments show that men actually got a 27 percent raise in this period and women 65 percent. The gains are not as big as those of the 1950's and 60's, but they do sound far more realistic than the official numbers."

Re: Let's Go Googling

alex — Wed, 11 Oct 2006 20:51:21 -0000

First, the original post was about people in one generation moving up, and I decided to point out that the example given was not conductive to the arguement being given.

On incremental growth over generations; its declining. Sorry to break it to you. The economic mobility of sons compared to their fathers fell from the seventies to the eighties, and from the eighties to the nineties. On the other side, the story about rags to riches to rags is a myth; rich people are now more likely to pass on dynastic wealth for more generations. Oh yeah, and the ability to move up even one quintile in a generation, not two or going to the top, has declined. And you were saying about incremental progress?

Also, I mentioned intergenerational mobility because of what it means. I agree that parents will pass on skills and wealth to their children. However, if this is the case, then there will not be equality of opportunity and a level playing field. You would have to admit that the US does have a class based society, where the children fortunate enough to choose the right parents start out way ahead and stay ahead. If you believe that, then its fine. But the main authors here continually deny that we have a class based society, that there is equal opportunity for all.

In addition, I will point out that you are making an irrelevant point. I was talking about economic mobility and class calcification, not whether it was OK or not for people to transmit wealth and skills to their offspring.

But to go on to what you say about your family. Ok, so? How your family has happened to be shaped does not impact the issue or arguement at all. Its confirmation bias. I have a few generations back of relatives who went to college and were professionals and successful and didn't transfer any wealth to me either. That is totally irrelevant to what I was addressing.

Re: Let's Go Googling

Confused by Alex — Wed, 11 Oct 2006 13:29:06 -0000

Alex, I am sorry to put this so bluntly but you are flat wrong and you insinuate that something is bad without backing it up.

1) Why does it matter that my future wealth is somewhat connected to my parent's? Not only do parents pass on money to their children they also pass on SKILLS. If my parents were in the top 10% it would stand to reason that they could help give me the skills to attain that level of wealth or income.

2) My great grandfather was a sharecropper in Arksansas. My Grandfather is a retired fork lift driver in backwoods Mississippi. One of uncles was the Vice President of a Fortune 500 company. My Aunt owns her own successfull sewing business and my parents are quite successfull. At what point did the previous "wealth" in my family step in to propel to the top of wage earners? Was it when Dad could see the snow blowing through the walls or when my grandfather taught himself the stock market?

3)You are only defining markets as mobile if people can move from the bottom 1% to the top 1% in one generation. Why do you ignore incremental growth over a number of generations?

Re: Let's Go Googling

Mr. Econotarian — Wed, 11 Oct 2006 13:23:18 -0000

Here's a better one from 1984 on net.politics:

"Why I'm voting for Mondale, Part I: The Economy"

"One is that Reagan's 'curves' are not going to converge. He's

basing his projections on the assumption that the economy will grow at a

steady rate of 4% a year over the next four years, which is a pipe dream at

best (talk about optimism!)."

On average, it certainly did grow at about 4% per year for four years.

Re: Let's Go Googling

Mr. Econotarian — Wed, 11 Oct 2006 13:17:16 -0000

Here is a post from 1983 talking about how the U.S. economy "lacks deep-rooted strength."

Weekly Business Summary - January 28, 1983

from USENET newsgroup net.invest...

"Length of Post War Recessions

The 1981-82 recession has lasted 18 months if you agree that the

recession actually began in July 1981 and ended in December 1982. How

does that compare to the length of previous recessions? It's the

longest. Here are results from previous downturns:

1981-82: 18 months

1973-75: 16 "

1969-70: 11 "

1960-61: 10 "

1953-54: 10 "

1957-58: 7 "

1980: 5 "

Why are there so many recessions since the late sixties? One reason

is that our economy lacks deep-rooted strength. It has been

artificially stepped up by the overspending of the federal government.

For long term economic growth, there must be less government

intervention. "

Re: Let's Go Googling

Adam Malone — Wed, 11 Oct 2006 13:09:42 -0000

David (of Canada) has highlighted the only important question that should be a part of "comparing" incomes. Is everyone better off now than they used to be or are only the rich people better off?

In everyway that question can be answered with a resounding "YES" we are all better off. In nation where the life expectancy of everyone is continually rising, where more babies survive than used to, people work fewer hours, those fewer hours purchase more goods, and we are a net exporter of food, healthcare, and education it is proposterous to think that we could possibly be worse off than we used to.

Between my PC, the internet, email, and my cell phone I can do more business in a day than could have been done in weeks or even months a few years ago.

Free trade creates wealth. Let's just enjoy it.

Re: Let's Go Googling

alex — Wed, 11 Oct 2006 13:06:18 -0000

This post is wrong on a number of accounts. First off, socioeconomic mobility in the US is lower than in so-called "Socialist" countries like France, Sweden, and Denmark. Also, now half of a person's income today can be linked in part to their parent's earnings, versus only a fifth in Canada, France, and other countries. So, when you say that the people at the top are changing, sorry, but you are wrong. The number of people staying at the top is increasing as the top gets ever higher.

Also, you say that you cannot tell that inequality is growing. Well then, you are very good at not noticing certain things, since you are paid to not notice inequality. I live in Pittsburgh, PA. Let me tell you, this isn't New York, San Fransisco, Palo Alto, in terms of the discrepencies in people's incomes or wealth, but the changes can be seen here, too. There are more boutiques, fine retaurants, and more generally stores that are not in the price range of what we would call the middle class (20th percentile to 80th percentile). More areas are becoming gentrfied. This is due in part to the increasing prosperity of UPMC in the area, as well as the growing wealth of the major universities here (Carnegie Mellon and Pitt). But don't tell me that, if in Pittsburgh of all places disparities are growing, that in the rest of the country, they are not. If we are talking about very rural areas and small towns with less than 10% of the country's population and have little connection outside, then yes. But hell no if you are talking about cities, suburbs and areas where the economy is connected and people are working and doing things.

Lastly, you mentioned the guys who founded Google as proof that people who are now at the top were not there recently. Several problems with this example. One, just looking at the bios on Sergy Brin and Larry Page, both had parents who were tenured professors and had professional mothers working as well. Both were born into families from at least the top 5% of the US population. That is not the same as starting in the bottom 20% at all. If we think society is relatively mobile, then people at the bottom have a similar chance to strike it rich to those near the top. The very fact that most of the newly successful people were already born near the top debunks the notion that society is mobile and that inequality doesn;t have consequences. Its easy to make a homerun when you are born on second or third, than if you are starting in the batters cage.

Add in the various inherited wealth types we have in this country (at least several hundred thousand, and growing), and you can see that the notion that things are very mobile is BS. Also, sorry to add this, but the people who pumped money into Google at the beginning were wealthy to start with, so as successful members from near the top get rich, the rich get richer as well. So much for mobility and inequality.

Re: Let's Go Googling

Russ Roberts — Wed, 11 Oct 2006 12:49:00 -0000

David,

Am I the distinguished Georgetown professor? Alas, I am merely an undistinguished professor at George Mason University. But thanks for the upgrade. And I try not to miss a chance to promote the name of our lesser known university.

Re: Let's Go Googling

Patrick R. Sullivan — Wed, 11 Oct 2006 11:44:09 -0000

'...some would say that the communists at least fed the population...'

The communist nations all had massive famines that killed millions. Literally starved to death. Just as is happening in North Korea today.

Re: Let's Go Googling

triticale — Wed, 11 Oct 2006 10:02:51 -0000

[W]ould taxing income from capital more lightly than income from labor be an example of those at the top stacking the game against everyone else?

To the extent that tax policy encourages capital investment, more subtly as noted above, it benefits little old me.

I do contract work on development projects in my field. I work when the client corporation makes capital investments. Q.E.D.

Re: Let's Go Googling

Caliban Darklock — Wed, 11 Oct 2006 09:27:34 -0000

Noah Yetter makes an excellent point. Inequality is not in and of itself inherently bad; what we should be looking at isn't whether the rich are doing a whole lot better than the poor, but whether the poor are doing a whole lot better now than they were before.

Re: Let's Go Googling

David Descôteaux — Wed, 11 Oct 2006 08:18:10 -0000

The fact that I am having a discussion about whether or not we are better off with a distinguished Georgetown professor while sitting on my couch back in Canada is proof the economy has been performing well. In 1980 no one questioned we were better off than in 1950, that 1950 was better than 1920 or 1920 was better than 1890, because our standards of living were lower, blogs didn't exist, and we simply couldn't create a fuss of the magnitude we're seeing today.

Re: Let's Go Googling

Noah Yetter — Wed, 11 Oct 2006 08:06:05 -0000

Inequality is not a meaningful concept in any of the ways it is usually measured. It is a pure statistical artifact, like the mean and standard deviation of the sum of poker hands or serial numbers. You cannot look out your window and see the distribution of income, nor does it affect you, the individual, in any way, shape, or form. In fact, quite the reverse, your income and/or wealth are *determinants* of measured inequality. The facts of our lives are not effects of this statistic, but rather its causes.

In my belief this is THE number one thing to keep in mind when pondering inequality.

Re: Let's Go Googling

JohnDewey — Wed, 11 Oct 2006 08:01:21 -0000

Adam Malone,

Very good post.

Redistributionists often argue that $500 million doesn't hurt the super-rich as much as $50,000 would hurt the blue-collar worker. In their twisted minds, that somehow justifies the legal theft of heirs' property.

Re: Let's Go Googling

Adam Malone — Wed, 11 Oct 2006 07:10:46 -0000

If you look at the Forbes list of the Richest Americans, it should become readily apparent that MANY on the list are there because of their own hard work.

Look at the top 20: Bill Gates, Warren Buffett, Micheal Dell, Larry Parge, Sergey Brin... These are just a few of those who made their billions through hard work, innovation, and savvy business skills. If Sam Walton were alive he would top the list at 77 billion, instead he 5 heirs on the list. Some would view that as tragic, that his billions were simply given to those who came after him.

When people make silly comments about raising the income tax or increasing the death tax, what they are saying is WE deserve the money more than THEY do. Isn't that at least as bad as the billionaires who want to keep their money?

No one would dream of walking up to a blue collar working and saying "I know you have saved $100,000 over your lifetime. Good job. Now we are going to redistribute that wealth among a whole lot of people who haven't done that."

But for some reason when we start talking about $100 million or $50 billion the that rule is changed. Like so many things, I believe those rules "change" because it isn't the people with the money (top 1%) making the rules; however, the people making rules usually want to at least act like they are blue collar workers, out there for the "workin" man.

But let me say this...if you read any biographies of people like Warren Buffet, you realize that they work just as hard as anyone else. They just are better at it than the rest of us.

When we die we want our kids to get every cent that we leave to them; how hypocritical if we say that these people don't deserve the same.

Re: Let's Go Googling

JohnDewey — Wed, 11 Oct 2006 06:39:40 -0000

Morgan,

Thanks for the link. The percentage of very wealthy who own businesses - 86% - is a little higher than I would have guessed.

I'm not sure these very wealthy business owners are all in the highest income group, though they are likely in the top 5%. Wealthy business owners I've known tend to reinvest most of their profits back into the buisiness and grow it.

Re: Let's Go Googling

Morgan — Wed, 11 Oct 2006 06:04:16 -0000

By the way, the VIP forum is a banking industry group, not a porn site. I thought I should make that clear, because looking at that URL there's no way I'd click on it without a little more information.