"What the Public Doesn't Know Can't Hurt Us."(comparison between Two Books on Income Distribution by Edward N. Wolff and Richard Armey)(Cover Story)
Krugman, Paul, The Washington Monthly
To a naive reader, Edward N. Wolff's Top Heavy: A Study of the Increasing Inequality of Wealth in America might seem unlikely to provoke strong emotional reactions. Wolff, a professor of economics at New York University, provides a rather dry, matter-of-fact summary of trends in wealth distribution, followed by a low-key case for a modest wealth tax. Although Wolff has done a commendable technical job in combining data from a number of sources to produce a fuller picture--in particular, his book tells us more about both long-term trends and international comparisons than has previously been available--the rough outlines of this story have been familiar and uncontroversial among economists for at least the past five years.
And yet Wolff's book has been the target of an astonishing barrage of conservative attacks: Multiple op-eds in The Wall Street Journal ("What Wealth Gap?" asked Michael Novak on July 11), hostile book reviews and so on. Why should such a mild-mannered little volume provoke such rage?
The answer is that this is a subject on which many conservatives are unable to hold a rational discussion. Make a mere statement of fact--say, for example, that the top 20 percent of households in the United States own 85 percent of the marketable wealth--and conservatives will insist that you rephrase it as "20 percent of the households have created 85 percent of the wealth." Try to assess long-term trends in income distribution using the standard, apolitical device of comparing incomes at the same stage of successive business cycles, such as 1973 and 1989, and you will be accused of an outrageous attempt to distort Ronald Reagan's record by mixing in the Carter years.
Conservatives are wrong about wealth inequality, but they are not irrational. There is a method and political purpose to their maddened reaction--a determination to deny the facts that is dramatically illustrated by House Majority Leader Richard Armey's new book, The Freedom Revolution. Put simply, conservatives don't want the public to know too much because they fear it would hurt them politically.
To understand the significance of Wolff's book, consider this simple parable: There are two societies. In one, everyone makes a living at some occupation--say, fishing--in which the amount people earn over the course of a year is fairly closely determined by their skill and effort. Incomes will not be equal in this society--some people are better at fishing than others, some people are willing to work harder than others--but the range of incomes will not be that wide. And there will be a sense that those who catch a lot of fish have earned their success.
In the other society, the main source of income is gold prospecting. A few find rich mother lodes and become wealthy. Others find smaller deposits, and many find themselves working hard for very little reward. The result will be a very unequal distribution of income. Some of this will still reflect effort and skill: Those who are especially alert to signs of gold, or willing to put in longer hours prospecting, will on average do better than those who are not. But there will be many skilled, industrious prospectors who do not get rich and a few who become immensely so.
Surely the great majority of Americans, no matter how conservative, instinctively feel that a nation that resembles the second imaginary society is a worse place than one that resembles the first. Yet there is also no question that our nation today is much less like the benign society of fishermen--and much more like the harsh society of prospectors--than it was a generation ago. The evidence is overwhelming, and it comes from many sources--from government agencies like the Bureau of the Census, from Fortune's annual survey of executive compensation, and so on. And, of course, there's the evidence that confronts anyone with open eyes. Tom Wolfe is neither an economist nor a liberal, but he is an acute observer. …