More On Income Inequality
Great timing Prof. Mankiw. A day after Rubinomics warrior Steve Rattner took to the pages of the WSJ to raise the alarm over income inequality, and was taken on by Donny Baseball here, Greg Mankiw puts a little thought experiment out there for us all to consider regarding income inequality. The concept is very clear and very simple, some labor is a commodity and some labor is a value-added good. Some labor is a simple softwood 2x4 and some is heat-treated, weather-resistant, enhanced-density, application specific engineered lumber. Some labor is a Ford Taurus and some labor is a Porsche Boxster. And the difference in labor is the same as the difference in those products, it all comes down to the inputs.
Unfortunately I think some people see such a statement as making an argument in favor of the inherent difference in personal worth (the Bell Curve thesis essentially applied to human value), and thus recoil at the notion. It is not making such an argument, it is merely making a clinical statement about how skills, not people, are rewarded in the marketplace. It is not that some people are inherently worth more or less as humans, just that the particular skills that some people possess are rewarded more than the skills that others possess. I think that part of the reason that certain people get so worked up over income inequality is that they fail to make this distinction and thus can't fail to have their egalitarian sensibilities offended. Such people also seem to not realize that the marketplace is mutable, the value of skills changes and the skills that people possess change. It is people that have a view of economic strata as generally fixed that see income inequality as this great societal bane.
Oddly though it is people whose skills have been highly rewarded in the marketplace that also adopt the conceit that there are inherent differences in worth. How else to explain highly accomplished people who would advocate to what extent you and me can drink certain beverages, or smoke, or contact with health insurers for a customized policy, or drive as many miles as we would like in our Ford Expeditions?
Unfortunately I think some people see such a statement as making an argument in favor of the inherent difference in personal worth (the Bell Curve thesis essentially applied to human value), and thus recoil at the notion. It is not making such an argument, it is merely making a clinical statement about how skills, not people, are rewarded in the marketplace. It is not that some people are inherently worth more or less as humans, just that the particular skills that some people possess are rewarded more than the skills that others possess. I think that part of the reason that certain people get so worked up over income inequality is that they fail to make this distinction and thus can't fail to have their egalitarian sensibilities offended. Such people also seem to not realize that the marketplace is mutable, the value of skills changes and the skills that people possess change. It is people that have a view of economic strata as generally fixed that see income inequality as this great societal bane.
Oddly though it is people whose skills have been highly rewarded in the marketplace that also adopt the conceit that there are inherent differences in worth. How else to explain highly accomplished people who would advocate to what extent you and me can drink certain beverages, or smoke, or contact with health insurers for a customized policy, or drive as many miles as we would like in our Ford Expeditions?
posted by Donny Baseball at 9:18 AM
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