Inequality: Is It Real?

Yikes! I agree with Will Wilkinson about something related to wealth and income inequality. Namely, contra Reihan it depends a great deal as to what to make of Alan Reynolds’ argument that we’ve been mis-measuring inequality by using flawed tax return data. I’m sort of actually not sure why Will (or, for that matter, Reynolds) thinks it matters whether or not our data is flawed, since I think they’re both libertarians who don’t think inequality is, normatively speaking, a problem. But those of us who do think it’s a problem normatively are obviously going to need to know how big a problem it is empirically.

I’m slightly unclear based on the op-ed exactly what Reynolds thinks the truth is once we correct for the flaws in the income tax data. Insofar as the appearance of rapid inequality growth over the past twenty years is incorrect because there turns out to have been more inequality than we previously thought during the fifteen years before that then I’m not going to take a huge amount of comfort from Reynolds’ revisionism but we’ll certainly have to change our thinking about trends and appropriate policy interventions. If, by contrast, there’s actually less inequality than we’d believed, other things might follow. What’s more, if recent trends have been small (which I think is what Reynolds thinks) then the direction of the trend-line still strikes me as important.

Which is just to say that this seems like an important project and I’ll be eager to read the lengthier, non-op-ed form of his argument along with, one hopes, commentary on it from people better-equipped than I to evaluate the work.