Customer Reviews

Income and Wealth (Greenwood Guides to Business and Economics)

5 star:		(5)
4 star:		(0)
3 star:		(2)
2 star:		(0)
1 star:		(1)

 

 

Conventional wisdom tells us that: (1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period; (3) low-wage burger-flippers have replaced high-paid factory jobs; (4) only the top one percent or ten percent have benefited significantly from rising productivity or asset prices; and (5) the once-robust middle class has been shrinking.

Just about everybody treats those assertions as if they are facts. That includes politicians on both sides, talking-head partisans, economics correspondents, and columnists--many with undisguised or thinly-veiled political agendas. They are supposed to be the experts, and the masses (like me) have to trust them; after all, our busy lives permit us only a limited amount of time for paying attention to politicians and the press. When the experts are nearly unanimous, that's a good signal that the five conventional wisdom assertions have to be true . . . isn't it?

That brings us to the big surprise, which Alan Reynolds sums up clearly and concisely: "Not one of those statements is even remotely close to being true."

This book is one of the best debunkings of conventional wisdom I've come across in a decade. It is a step-by-step dismantling of conventional wisdom about income and wealth distribution. Alan Reynolds does it methodically, one point at a time--using direct quotes from people who make those assertions, clear logic explaining what's wrong or misleading about those assertions, and facts and figures from easily-checkable references to official, government-published sources (such as the Statistical Abstract of the United States, the Bureau of Economic Analysis, and the Bureau of Labor Statistics).

Why, then, do so many people seem to accept the false conventional wisdom without question? I have a guess: Each of us likes to think the person we heard it from must have done their homework; otherwise they wouldn't be talking like that. Let's face it, assumptions like that save us a lot of work. In this case, however, I now realize that, by trusting conventional wisdom, I was being too lazy--and I strongly suspect that most of our country's so-called "economics correspondents" are guilty of the same thing I was.

I am thankful that Alan Reynolds is one who actually did the homework on this subject, then wrote a book laying out his findings. His attitude is one we should all adopt: "I accept nothing as an article of faith. I want to hear the logic and see the evidence. And you should demand nothing less. In the absence of logic and evidence, you should not give a hoot about my opinion. Reality is not a matter of opinion."

And I'll steal one more passage from his book: "No matter what one thinks ought to be done about taxes, spending, unions, immigration, minimum wage laws, and so on, the first thing that needs to be done is to get the facts right. If that happens, there will still be plenty of room for lively debates about all sorts of public policies. And they will be *honest* debates."

This book will always be within an arm's reach of my workstation. I highly recommend it, especially to anyone thinking about writing on the subject of income or wealth "distribution" in the United States of America.

Get this book, and get ready for a big surprise.

I consider myself a blue collar American now retired and with time to try to understand these economic conditions I find I have been living within. If you feel you are not understanding what you are reading or the media is telling you about as concerns inflation, unemployment, rich-poor income gaps, etc., then this is probably the book for you, too. I feel it is very clear and very complete, but I will have to read it again, mostly because it changed my mind on so many things, I want to be sure where I have been left in my opinions on these things. The price, which I consider high for a "blue collar" reader, may hold you back. It did me for a few weeks. But, I am glad I finally ordered it.

OK, maybe the book is a bit advanced for high schoolers (thanks to the stranglehold that the teachers' unions have on the public school system). But the main point is this--Reynolds lays out his case in plain English, in a manner accessible to anyone with an open mind, that so much of the economic commentary emanating from the "minds" of pundits and politicians is just pure BUNK.

The main themes of the book, which recur throughout, are these:

1) Most published reports of income/wealth inequality are based, at best, on incomplete measures, failing to account for government transfers (from "rich" to "poor") and for the painfully obvious fact that two-earner households tend to have higher household incomes than one-earner or (especially) zero-earner households.

2) "Static" analyses of income/wealth inequality fail to account for the simple fact that people's income and wealth tend to increase over time as they develop ever greater skills and as their 401K plans grow over the years.

Reynolds also points out the only effective ways to achieve "true" income/wealth equality. Either have widespread poverty, so that nobody has anything, or have exorbitant tax rates so that nobody can keep anything.

This should be a very important book as we all decide what sort of President to elect in 2008.

Income and Wealth challenges the prevailing misconceptions that there is a growing inequality in the distribution of wealth and income in the United States. Alan Reynolds addressed the specific studies and meticulously picks apart both the inaccurate methodology, and the preconceived assumptions that drive poor conclusions from even poorer data.

Having greater inequality is not synonymous with having more poverty: some of the poorest nations have some of the most equal distribution of income. Poverty is equally shared rather than wealth unequally shared.

Reynolds shows that measurements of wage inequality is a poor measurement of living standards. Many of these studies are measured pre tax, and exclude transfer payments which may include as much as 70% of the income of the lower quintile. Many used the data obtained by ignoring transfer payments to argue for ... more transfer payments. Wealth accumulating in middle class retirement accounts are also often excluded.

The data is further distorted by comparing income before the 1986 tax reform when corporate tax income was shifted from C-corps to S-corps and thus went from NOT showing up on personal tax returns to now being included. Tax changes also changed the impact that stock options had on the income of the upper quintile.

The author argues that measurements of all income or consumption provides both an easier to measure and a more accurate measurement of the inequality in living standards. Such an approach indicates that the inequalities are much less drastic; in many cases there has been very little change, depending on which years are picked as beginning and ending points. The time period selected to measure can also greatly impact the results of such studies.

For anyone who wants to understand the changes in income and wealth and is skeptical of much the misleading studies repeated to the point of blind acceptance by media and political leaders, you could not be armed with a better single source.

In this terrific little book, Alan Reynolds, a senior fellow at the Cato Institute patiently destroys some of the cherished myths of the Left, such as (1) the middle class is "vanishing"; (2) income inequality is increasing; (3) wages have stagnated.

Reynolds convincingly unravels the statistical jujitsu employed by the likes Paul Krugman purporting to show that Americans are no better off than they were three decades ago. How anyone alive in the 1970s could find such an argument plausible to begin with is amazing itself, but that would be the subject of another book. Reynolds is an economist, not a psychoanalyst, so he confines himself to dissecting the economic data.

One of the shibboleths he convincingly lays to rest is that of the vanishing middle class, a line often repeated by Krugman and TV huckster Lou Dobbs. Indeed, there have been numerous reports showing a decline in the percentage of households earning between $30,000 and $50,000. However, as Reynolds observes, the decline was due to the fact that the percentage earning more than $50,000 had gone up! In other words, a rising percentage of households are joining the ranks of the rich and leaving the middle class, a fact that should be celebrated, not bemoaned.

This book is junk science. Even the center-Right Economist blog has stated that Reynolds and the few other inequality deniers still out there are completely off-base. It is absolutely established now that inequality has been rising in America for the last thirty years. Every data set available - IRS, CBO, Census, Consumption, and Labor - shows the same trend. Even the CIA has stated that income inequality has gotten much worse in America over the last thirty years. Reynolds is one of the few junk scientists still peddling the ridiculous notion that inequality and wealth concentration is not getting worse in America. You don't have to be a rocket scientist to take one look around you and know that this guy is completely full of crap. It seems that his slave masters, the billionaire oil tycoon Koch brothers, have told him not to let off the gas as it would undermine the vast wealth they have stolen from the American people over the last century. Read this book for an understanding of what the rich, greedy, corporate socialists want you to think is happening to America. But believe it at your peril.

If you want an honest and fact driven assessment of what's been happening to the middle class for the last thirty years, not just smoke and mirrors, read Jacob Hacker, Robert Frank, or Larry Bartells. All three are legitimate professors who use the most reliable data.

The Federal Reserve, US Department of Treasury, publishes every three years a Consumer Finance Survey
that details the distribution of Wealth in the USA. This is the authoratative source. According to this study
half of the population owns 2.5% of the wealth of the country. One percent owns 33% of the wealth. Readers of this book should go to the most credible source of information, and also be familiar with the works of Edward Wolff and other scholars.

I bought this book thinking it was a get rich quick book...boy was I disappointed! It suxs.

If you're interested in money, who has how much, and why, I recommended the book by Andrew Hacker, which is cheaper, entitled "Money: Who Has How Much and Why" (1997). Data therein can be multiplied by 1.3 to give current inflation adjusted figures.