Home > Uncategorized > Production of inequality ignorance and knowledge

Production of inequality ignorance and knowledge

from David Ruccio

One Percent

Greg Mankiw is not sure why we’re talking about income inequality now:

One hypothesis is that we don’t worry about inequality when everyone is doing well. Another hypothesis is that we now have a president with a political ideology that sees inequality as especially pernicious.

As it turns out, Daniel Hirschman [ht: tc] at the University of Michigan wrote a dissertation chapter on the topic, in the field of sociology: “Rediscovering the 1%: Economic Expertise and Inequality Knowledge” (pdf).

Here’s the abstract:

In the 2000s, academics and policymakers began to discuss the growth of top incomes in the United States, especially the “top 1%.” Newly analyzed data revealed that top income earners in the 1990s received a larger share of income than at any point since the Great Depression, and that their incomes had begun a dramatic upward climb in the early 1980s. This paper investigates why it took two decades for this increase in top incomes to become politically and academically salient. I argue that experts assembled two “regimes of perceptibility” (Murphy 2006) for producing knowledge about income inequality, and that neither of these regimes was capable of tracking movements in top incomes. Macroeconomists focused on labor’s share of national income, but did not examine the distribution of income between individuals. Labor economists, on the other hand, drew on newly available survey data to explain wage disparities in terms of education, age, work experience, race, and gender. By relying on surveys, these scholars unintentionally eliminated top incomes from view: surveys top-coded high incomes, and thus were incapable of seeing changes in the top 1%. Studies of top incomes that relied on income tax data thus fell by the wayside, creating the conditions under which experts, policymakers, and the public alike could be surprised by the rise of the 1%. This historical narrative offers insights into the political power of economic expertise by clarifying the complex linkages between observations, stylized facts, causal theories, and policy attention.

There’s a great deal to recommend in Hirschman’s analysis, in terms of both his theoretical framework (in which he focuses on “regimes of perceptibility” and the way those regimes produce both ignorance and knowledge about inequality) and the history of those regimes (especially in mainstream macroeconomics and labor economics in the twentieth century).

But I also think Hirschman overlooks or downplays significant parts of that history of the regimes of perceptibility with respect to inequality within economics. Let me briefly discuss three that strike me as important in terms of tracking or, as has most often been the case, not tracking movements in top incomes.

First, while Hirschman does mention the classical political economists’ (especially David Ricardo’s) concern with the “distribution of income between the classes,” he never touches on Marx’s critique of political economy. He therefore fails to understand how, after Marx, the distribution of income within capitalism has come to be associated, directly or indirectly, with (a) class exploitation and (b) distributions of the surplus-value capitalists appropriate from wage-laborers to those at the top of the distribution of income.

Second, while mainstream macroeconomists have historically referred to the “stylized fact” of relatively constant factor shares, those factor or class shares of income never played an important explanatory role in their theoretical frameworks. Within mainstream macroeconomics, the portions of national income stemming from or going to labor and capital have never been considered to be a significant factor in—either as cause or consequence of—the recurring boom-and-bust cycles of capitalism.

Third, the postwar rise to hegemony of neoclassical economic theory (in labor economics but also across the discipline) meant that marginal productivity theory and the notion of “just deserts” were, within mainstream economics, the predominant way the distribution of income—in terms of both the factor and size distribution—was understood. If every group and individual is getting its “fair,” marginal contribution to production, there’s really nothing else to worry about or investigate.

As I understand it, the combination of the specter of class after Marx and the discursive rules within mainstream economics created a field of ignorance that was only broken—at least partially—with the spectacular crash of 2007-08. Only then did the growing share of income going to the top 1 percent acquire some relevance in the wider society and, to a lesser extent, within the discipline of economics.

Even today, and despite the important empirical knowledges produced by Thomas Piketty and Emmanuel Saez, the regimes of perceptibility within mainstream economics continue to produce a profound ignorance concerning the causes and consequences of the unequal distribution of income within contemporary capitalism.

  1. January 4, 2016 at 6:57 pm

    “Even today, and despite the important empirical knowledges produced by Thomas Piketty and Emmanuel Saez, the regimes of perceptibility within mainstream economics continue to produce a profound ignorance concerning the causes and consequences of the unequal distribution of income within contemporary capitalism.”

    Perfectly logical since mainstream economics serves the interests of the 1%.

  2. January 4, 2016 at 7:25 pm

    “Forgive them Father, They know not what they do.”
    And, of course, a quote by Frederick Soddy, a ‘crank’ whose money “Theory” may someday be noted as truth,”So elaborately has the real nature of
    this ridiculous proceeding been surrounded with
    confusion by some of the cleverest and most
    skillful advocates the world has ever known, that
    it still is something of a mystery to ordinary
    people, who hold their heads and confess they
    are ” unable to understand finance “. It is not
    intended that they should.” Frederick Soddy (The Role Of Money)

    “There never was an idea stated
    that woke men out of their stupid indifference
    but its originator was spoken of as a crank.”— Oliver Wendell Holmes, Sr.(1809-1894) American Poet

    .***Why not read and challenge a Noble Laureate ?
    **Excerpt from http://en.wikipedia.org/wiki/Frederick_Soddy
    “In four books written from 1921 to 1934, Soddy carried on a “quixotic campaign for a radical restructuring of global monetary relationships”, offering a perspective on economics rooted in physics—the laws of thermodynamics, in particular—and was “roundly dismissed as a crank”. While most of his proposals –
    “to abandon the gold standard,
    let international exchange rates float,
    use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends,
    and establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort” – are now conventional practice, his critique of fractional-reserve banking still “remains outside the bounds of conventional wisdom”.
    Soddy wrote that financial debts grew exponentially at compound interest…”

    ***Why not read and challenge a Noble Laureate ?

    • January 4, 2016 at 11:07 pm

      Even allowing the relevance to the discussion of the first line of this, Lucky, please adhere to the comment guideline:

      • Do not post slight variations of the same comment under multiple posts.

  3. January 5, 2016 at 7:00 am

    You all miss the real problem. The problem is not deliberate ignorance (really deliberate selection of one thing over another). That happens all the time and is routine. The problem is that all the people talking about “studying” economic equality are economists. And in all that studying with all those mathematical models and complex theories economists lost themselves and in so doing lost the objects of their study – the economics that non-economists had invented and used. But others – novelists, historians, artists, etc. – did not lose touch. They saw and as best they could represented (told the stories) of these inventions and their consequences. In “Hard Times,” Charles Dickens says this,

    It was a fundamental principle of the Gradgrind philosophy that everything was to be paid for. Nobody was ever on any account to give anybody anything, or render anybody help without purchase. Gratitude was to be abolished, and the virtues springing from it were not to be. Every inch of the existence of mankind, from birth to death, was to be a bargain across a counter. And if we didn’t get to Heaven that way, it was not a politico-economical place, and we had no business there.

    Charles Dickens (2015-12-25). Hard Times: By Charles Dickens – Illustrated (Comes with a Free Audiobook) (Kindle Locations 5795-5799). Golden Classics. Kindle Edition.

    In “The Crime of Poverty,” (1885) Henry George says,

    The curse born of poverty is not confined to the poor alone; it runs through all classes, even to the very rich. They, too, suffer; they must suffer; for there cannot be suffering in a community from which any class can totally escape. The vice, the crime, the ignorance, the meanness born of poverty, poison, so to speak, the very air which rich and poor alike must breathe.

    George, Henry (2015-05-02). The Crime of Poverty (Kindle Locations 14-16). . Kindle Edition.

    And historians have written extensively on the ways, results, and failures of academia to help address inequality, economic and otherwise. For example, in his “popular” history of the Gilded Age Sean Dennis Cashman writes,

    If the Gilded Age had a motto it might well have been, “The ayes have it,” not only for the celebrated interest in voting stock, but also for the eyes that rejoiced in the glitter of gold, and the I’s that define many of the pervasive social themes. Society was obsessed with invention, industrialization, incorporation, immigration, and, later, imperialism. It was indulgent of commercial speculation, social ostentation, and political prevarication but was indifferent to the special needs of immigrants and Indians and intolerant of African-Americans, labor unions, and political dissidents.

    Cashman, Sean Dennis (1993-10-01). America in the Gilded Age: Third Edition (Kindle Locations 201-206). NYU Press. Kindle Edition.

    I could go on and on with novels, plays, paintings, histories, and journalist reports. Consequently, I find it difficult to believe that economists missed all this. Unless by intent, or because other concerns diverted their attention elsewhere. I suspect economists’ “lack of knowledge” about economic inequality for over 50 years is a combination of intent and corruption but can’t say what the proportions of these are.

  4. the ghost
    January 10, 2016 at 11:49 am

    Economics is still in it’s infancy,but like unlike the Doctors who have built up a properly worded(ie in the right circumstances shocking the heart is the correct response but not if,its the wrong set of circumstances), response to our ills,economist still blood let for everything! tax cuts are good in certain circumstances,just has are tax hikes,we may not know when making deals if the price is right but we can see the out comes & react accordingly,the difference between the true value of anything & everything & the price paid is the damage done to the economy?

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