I recently attended a workshop at Stanford for a paper on the redistributive effect of the US system of taxes and expenditures, to what degree it transfers from rich to poor.
A tricky problem, indeed. But perhaps that not only cannot be solved but should not be. Why should anyone truly care about whether or not the proper amount of redistribution is either known or achieved.
Your examples are in line with my experience. I was born in a poor rural (mostly tenant -- we owned a small acreage) farm family. We had a small but adequate house, made lots of our own clothing, had plenty of good food (that we mostly raised ourselves) and plenty of love.
The rest of my family moved into the lower middle class (second from bottom quintile income) well after I left for military service.
I got married and got into that same second quintile, never got into the middle quintile.
Then I got divorced and rapidly fell into the bottom quintile again, but did gain some acquaintance with, let's say, the gray labor market.
Met a girl, went to grad school with her, remained in the bottom quintile for nearly a decade, then armed with advanced degrees we each got nice professional jobs and moved from the bottom quintile to the top in one step over a two year period.
We spent 25 years in the top quintile, occasionally in the top 10 percent, lived frugally, invested well, and now are comfortably upper middle class. How the heck to you map such a journey that both makes sense and says anything about redistribution?
Anyway, redistribution is now essentially pushed by Marxists and other Leftists who use it as a cudgel to try to beat the average American into feeling guilty enough to allow thenselves to be overtaxed in order to satisfy the lust for power that underlies all Leftist regimes.
"The simplest is the change over time in the value of different abilities. Being physically strong is still useful in some jobs but less valuable and in fewer than it was a century or more ago."
I believe that physical strength is just as good and likely much better than it was a century ago. Time and labor saving machines are significantly better than they were 100 years ago. A single coal miner can operate an underground mining system pulling many tons of coal out per shift, compared to a guy with a pick doing backbreaking labor producing far less in previous eras.
The difference is that intellectual labor has gotten much much more valuable with time.
Physical labor has an essentially static level of value. That's not to say that every laborer is equally capable or efficient, but in the big picture of the economy, it's relatively safe to assume that one laborer is approximately equal to another. These values are also necessarily low.
Let's make up some numbers to show what I mean. Say that a laborer can produce between 1 and 10 units of work in a day. That's a huge variation! That would mean some laborers are worth 10 times as much as another! A force multiplier for labor (such as a shovel or a backhoe) can also increase the amount of productivity, maybe making one person 2-10X more productive than otherwise - big differences!
But the CEO may make a decision on a phone call at lunch that determines the outcome of 10,000 units of work (which is a very small thing at a company with 100,000 employees, one tenth of one day's output - that CEO should work harder!).
Intellectual labor is a force multiplier. One guy with an Excel program and an email account can affect many multiples of what a laborer can even theoretically do. An accountant can be worth hundreds of individual workers fairly easily by moving a few numbers around in the right direction (for instance, by lowering the taxable income of the company by a few million dollars).
Would you consider a bulldozer operator to be an intellectual laborer? It's not a skilled trade, and I doubt you agree with the intellectual option.
Even machines in factories are not operated by the intellectual side. Build by them? Yes. Set up and fixed by them? At least partially. But the actual operators are often the same types of people who did pure manual labor 100 years ago. Most of what a machine operator does in a factory setting is load and upload materials (often physically by hand) and hitting the start and stop buttons.
Yes, but that's actually also true for most physical labor as well. If you've ever seen an idiot working and making the situation worse and then seen an expert come in and complete the work in seconds you would understand. I used to be the idiot and my next door neighbor was the manual labor expert. I am probably a good bit smarter than him and I was roughly 30 while he was in his 70s, and he could run circles around me when it came to physical labor. And it wasn't because he was stronger.
You're right in the modern world, and that includes the world that every living person grew up in.
Pre-industrial revolution a common job would be moving heavy stuff from one place to another, or chop this tree, or swing this sword all of which would be improved by a strength increase.
Since we started replacing Braun with diesel and gunpowder the advantages of strength have largely disappeared.
I have two almost completely different points on this general topic.
Re: worrying about “income inequality”, this is a purely political play by the left. More income inequality is specifically a *good* thing when it’s in the form of Buffett, Bezos, Jobs, Gates, Musk, etc. Society gets the large majority of the surplus value they create, and the world is better off. And as both Bernie and Trump agree, it is of course very bad when it is caused by “the system is rigged“ crony capitalism - but the answer there is to radically reduce the amount of crony capitalism. But violating the Tenth Commandment politics of envy plays particularly well with the college miseducated midwit crowd, and with guilty Wall Street types and of course the media and academia.
On the issue of redistribution (and the related issue of progressive tax rates, if the top marginal rates aren’t *too* steep), I’m much less opposed to the concept than I used to be. I’d be happy enough to let the center-left have its way on tax rates and the amount of redistribution to individuals, **IF** we classical liberals / libertarians largely got our way on deregulation and eliminating most of the bad government spending on things not in the “minarchy” (I’d keep defense, police, courts spending, where I differ with the DFs of the world) that are *not* just redistribution of cash in one way or another.
Might not be the ideal world, but it’d be a darn-good “second best” one. I guess in a way that might make me about 25% in the Tyler Cowen “State Capacity Libertarianism” camp, even if I could never get to 51%, let alone 90%, of the way there.
Another one, in my opinion , unfigureable is how much of every dollar ends up in the governments' hands?
The buck leaves the printing press, I receive it as part of my wages and am taxed on it accordingly. In it's journey parts of it may be moved to government with other specific taxes; property, sales, liquor, etc., but just following income taxes I spend it, expenditure, someone receives it, income, and there, again that dollar is taxed accordingly. They spend it, someone receives it and again that dollar is... etc., etc., etc......
No way to classify the population by lifetime income? The SSA maintains a lifetime earnings record for everyone with a SSN, essentially the entire population. Not a perfect measure of income, but pretty good. May not be accessible to researchers, but the data is there.
My sense is that there is a great deal of private redistribution that has not been studied. Harvard admissions are need-blind, and tuition is not charged for any student from a family with an annual income of less than $175,000. Other selective colleges have similar policies. Phillips Exeter does not charge tuition if the family makes $125,000 or less. They are not alone among elite prep schools. The drug companies all have patient assistance programs. Museums offer free or nominal admission to the public and rely on wealthy donors. Etc.
Does price discrimination count as redistribution? If the marginal cost of a drug is $10 and the average cost is $50, it is in the interest of the drug company to sell it for any price above $10 to anyone who wouldn't buy it at the usual price and a patient assistance program is one way of doing that.
Similar arguments are harder to make for your other examples but not impossible. Harvard or Phillips Exeter benefits by having very smart students, might benefit (claims to) by having a more diverse student body. The museum doesn't know which visitors are rich enough and interested enough to pay an admission that would support the museum, may make more money by letting everyone in for free so that some visitors will donate money to them.
You may be right on the data issue — it's not my field. I was going by the fact that the researchers, including the presenter who I asked about it, had made no attempt to sort people by lifetime income.
Interesting question, but is it meaningful to incorporate the benefits of what is patently price discrimination into a measure of welfare?
If one is truly trying to figure out the distribution of well being, what's wanted is a measure of the distribution of life time utility. That requires interpersonal utility comparisons. Ugh!
'Tis much easier to go back to the classical liberals, Hayek, Milton Friedman, and some others and ask not about the income distribution, but about poverty and its most effective amelioration. Perhaps best to look at this as an insurance problem [Harsanyi, not Rawls] behind a veil of ignorance.
Properly measured, it is insufficiently appreciated that poverty has been eradicated in rich countries, including the US of A [though by inefficient means everywhere]. I surmise that is one reason the contemporary left has drifted away from its original agenda.
Fair point but those SSA records cannot account for income that is not reported. My sense is that this is primarily income for people in lower quintiles but I really don't know.
A tricky problem, indeed. But perhaps that not only cannot be solved but should not be. Why should anyone truly care about whether or not the proper amount of redistribution is either known or achieved.
Your examples are in line with my experience. I was born in a poor rural (mostly tenant -- we owned a small acreage) farm family. We had a small but adequate house, made lots of our own clothing, had plenty of good food (that we mostly raised ourselves) and plenty of love.
The rest of my family moved into the lower middle class (second from bottom quintile income) well after I left for military service.
I got married and got into that same second quintile, never got into the middle quintile.
Then I got divorced and rapidly fell into the bottom quintile again, but did gain some acquaintance with, let's say, the gray labor market.
Met a girl, went to grad school with her, remained in the bottom quintile for nearly a decade, then armed with advanced degrees we each got nice professional jobs and moved from the bottom quintile to the top in one step over a two year period.
We spent 25 years in the top quintile, occasionally in the top 10 percent, lived frugally, invested well, and now are comfortably upper middle class. How the heck to you map such a journey that both makes sense and says anything about redistribution?
Anyway, redistribution is now essentially pushed by Marxists and other Leftists who use it as a cudgel to try to beat the average American into feeling guilty enough to allow thenselves to be overtaxed in order to satisfy the lust for power that underlies all Leftist regimes.
"The simplest is the change over time in the value of different abilities. Being physically strong is still useful in some jobs but less valuable and in fewer than it was a century or more ago."
I believe that physical strength is just as good and likely much better than it was a century ago. Time and labor saving machines are significantly better than they were 100 years ago. A single coal miner can operate an underground mining system pulling many tons of coal out per shift, compared to a guy with a pick doing backbreaking labor producing far less in previous eras.
The difference is that intellectual labor has gotten much much more valuable with time.
Physical labor has an essentially static level of value. That's not to say that every laborer is equally capable or efficient, but in the big picture of the economy, it's relatively safe to assume that one laborer is approximately equal to another. These values are also necessarily low.
Let's make up some numbers to show what I mean. Say that a laborer can produce between 1 and 10 units of work in a day. That's a huge variation! That would mean some laborers are worth 10 times as much as another! A force multiplier for labor (such as a shovel or a backhoe) can also increase the amount of productivity, maybe making one person 2-10X more productive than otherwise - big differences!
But the CEO may make a decision on a phone call at lunch that determines the outcome of 10,000 units of work (which is a very small thing at a company with 100,000 employees, one tenth of one day's output - that CEO should work harder!).
Intellectual labor is a force multiplier. One guy with an Excel program and an email account can affect many multiples of what a laborer can even theoretically do. An accountant can be worth hundreds of individual workers fairly easily by moving a few numbers around in the right direction (for instance, by lowering the taxable income of the company by a few million dollars).
Operating a machine is largely an intellectual activity.
The market for moving heavy stuff has largely been replaced by heavy machinery.
Would you consider a bulldozer operator to be an intellectual laborer? It's not a skilled trade, and I doubt you agree with the intellectual option.
Even machines in factories are not operated by the intellectual side. Build by them? Yes. Set up and fixed by them? At least partially. But the actual operators are often the same types of people who did pure manual labor 100 years ago. Most of what a machine operator does in a factory setting is load and upload materials (often physically by hand) and hitting the start and stop buttons.
I wouldn't use the term 'intellectual labourer' not sure anyone would.
The point I was trying to make is that the quality of a bulldozer operator would correlation more with his intelligence than his 'brawn'.
Yes, but that's actually also true for most physical labor as well. If you've ever seen an idiot working and making the situation worse and then seen an expert come in and complete the work in seconds you would understand. I used to be the idiot and my next door neighbor was the manual labor expert. I am probably a good bit smarter than him and I was roughly 30 while he was in his 70s, and he could run circles around me when it came to physical labor. And it wasn't because he was stronger.
You're right in the modern world, and that includes the world that every living person grew up in.
Pre-industrial revolution a common job would be moving heavy stuff from one place to another, or chop this tree, or swing this sword all of which would be improved by a strength increase.
Since we started replacing Braun with diesel and gunpowder the advantages of strength have largely disappeared.
Our research did not find that assortative mating for education has increased. Somewhat odd.
https://pmc.ncbi.nlm.nih.gov/articles/PMC11146041/
I have two almost completely different points on this general topic.
Re: worrying about “income inequality”, this is a purely political play by the left. More income inequality is specifically a *good* thing when it’s in the form of Buffett, Bezos, Jobs, Gates, Musk, etc. Society gets the large majority of the surplus value they create, and the world is better off. And as both Bernie and Trump agree, it is of course very bad when it is caused by “the system is rigged“ crony capitalism - but the answer there is to radically reduce the amount of crony capitalism. But violating the Tenth Commandment politics of envy plays particularly well with the college miseducated midwit crowd, and with guilty Wall Street types and of course the media and academia.
On the issue of redistribution (and the related issue of progressive tax rates, if the top marginal rates aren’t *too* steep), I’m much less opposed to the concept than I used to be. I’d be happy enough to let the center-left have its way on tax rates and the amount of redistribution to individuals, **IF** we classical liberals / libertarians largely got our way on deregulation and eliminating most of the bad government spending on things not in the “minarchy” (I’d keep defense, police, courts spending, where I differ with the DFs of the world) that are *not* just redistribution of cash in one way or another.
Might not be the ideal world, but it’d be a darn-good “second best” one. I guess in a way that might make me about 25% in the Tyler Cowen “State Capacity Libertarianism” camp, even if I could never get to 51%, let alone 90%, of the way there.
Another one, in my opinion , unfigureable is how much of every dollar ends up in the governments' hands?
The buck leaves the printing press, I receive it as part of my wages and am taxed on it accordingly. In it's journey parts of it may be moved to government with other specific taxes; property, sales, liquor, etc., but just following income taxes I spend it, expenditure, someone receives it, income, and there, again that dollar is taxed accordingly. They spend it, someone receives it and again that dollar is... etc., etc., etc......
No way to classify the population by lifetime income? The SSA maintains a lifetime earnings record for everyone with a SSN, essentially the entire population. Not a perfect measure of income, but pretty good. May not be accessible to researchers, but the data is there.
My sense is that there is a great deal of private redistribution that has not been studied. Harvard admissions are need-blind, and tuition is not charged for any student from a family with an annual income of less than $175,000. Other selective colleges have similar policies. Phillips Exeter does not charge tuition if the family makes $125,000 or less. They are not alone among elite prep schools. The drug companies all have patient assistance programs. Museums offer free or nominal admission to the public and rely on wealthy donors. Etc.
Does price discrimination count as redistribution? If the marginal cost of a drug is $10 and the average cost is $50, it is in the interest of the drug company to sell it for any price above $10 to anyone who wouldn't buy it at the usual price and a patient assistance program is one way of doing that.
Similar arguments are harder to make for your other examples but not impossible. Harvard or Phillips Exeter benefits by having very smart students, might benefit (claims to) by having a more diverse student body. The museum doesn't know which visitors are rich enough and interested enough to pay an admission that would support the museum, may make more money by letting everyone in for free so that some visitors will donate money to them.
You may be right on the data issue — it's not my field. I was going by the fact that the researchers, including the presenter who I asked about it, had made no attempt to sort people by lifetime income.
Interesting question, but is it meaningful to incorporate the benefits of what is patently price discrimination into a measure of welfare?
If one is truly trying to figure out the distribution of well being, what's wanted is a measure of the distribution of life time utility. That requires interpersonal utility comparisons. Ugh!
'Tis much easier to go back to the classical liberals, Hayek, Milton Friedman, and some others and ask not about the income distribution, but about poverty and its most effective amelioration. Perhaps best to look at this as an insurance problem [Harsanyi, not Rawls] behind a veil of ignorance.
Properly measured, it is insufficiently appreciated that poverty has been eradicated in rich countries, including the US of A [though by inefficient means everywhere]. I surmise that is one reason the contemporary left has drifted away from its original agenda.
Fair point but those SSA records cannot account for income that is not reported. My sense is that this is primarily income for people in lower quintiles but I really don't know.