Brad Delong probes Paul Krugman’s piece on the technocratic myth comes up with his own list of what’s driving economic inequality:
- The rise of a very powerful, successful, exploitative upper class.
- Further increases in inequality as the tax and transfer system becomes less progressive.
- Increases in risk that threaten to move middle-class families sharply downward in the wealth distribution.
- Skill-biased technical change that sharply raises the benefits to education.
- Holes in the safety net–the fall in the value of the minimum wage, time-limited welfare, and so forth.
Good points to think about.#3 echoes the point of that Robert Shiller book on risk I really should read. #4 seems to be referring to the amazing income paid to tech people, especially during the dot-com years. I’m left wonder about the other top income earners, though: top corporate executives. My fellow travelers tend to blame indiviudal greed for the skyrocketing upper-managerial salaries, but it strikes me as a poor explanation (were people less greedy ten, twenty, forty years ago?) . Instead, we have possibility that consolidation: executives get paid a lot because the corporate assets under their stewardship are much larger, therefore marginal differences in management skill mean a lot. Or, we have the possibility that there’s an irrationality in the labor market for upper management; whether we call it the "superstar effect" or something else, its genesis is strictly social in nature, and not a self-conscious attempt at exploitation, as in #1. Though existence of #1 very likely helps in fostering an environment in which this irrationality strikes participants as thoroughly rational.
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