Sunday, March 21, 2010

Well, It's Come to This

. Sunday, March 21, 2010

Emmanuel-across-the-Pond's love of poking fun of the U.S. is only matched by his love of poking fun of those who don't seek the utter humiliation and extirpation of the U.S. That means me. Which is all fine and good, and leads to some good discussions, but I fear that he's gone one step beyond this time.

First, he endorses a theory of inequality that relies on "assortative mating" to explain shifts in income inequality. The theory basically says that before the 1960s capital and labor were in an "asymmetric marriage" where Capital guaranteed capital to Labor, and Labor guaranteed labor to Capital so they could mutually benefit from each other's company. (Funny... the rest of us call that relationship by another name: "markets"). Anyway, the crack-up supposedly occurred in the 1960s, and now Capital and Labor keep to themselves, doing everything in their power to keep everyone below them in the income ladder from climbing up.

As his own data show, the cross-sectional divergence in income inequality across OECD nations is pretty stark, and there is nothing in this theory to explain why. Nor can he explain cross-temporal shifts; if Labor was bothered in the 1960s, presumably they should be even more angry now that income inequality has drastically increased. In fact, the 1960s was during the Golden Age of increased income parity in the Anglo-Saxon world; the Gilded Age began in the early 1970s. But as the recent debate over health care reform in the U.S. has shown, at least that part of the industrialized world is not interested in class warfare.

But then he says this (presumably with tongue in cheek, but who knows) in a subsequent post:

I would venture that limiting credit to these people is precisely what the doctor ordered. ...

Americans are great at GM foods; perhaps in the future they should churn out genetically modified persons who have "thrifty" genes once these are better understood.

Seriously, Emmanuel? Would that make the "asymmetric marriage" or "assortative mating" more efficient? And why stop with the "thrifty" genes? Jeebus... I never expected an endorsement of the Brave New World from someone with such a healthy distrust for the Anglo-American powers-that-be.

UPDATE: Just in case it isn't evident, I'm being somewhat sarcastic in this post, although I do think that Emmanuel, the theories he advocates in these posts, and his general interpretation of the global political economy is dead wrong.


Emmanuel said...

No, no--I don't advocate inequality. I'm just trying to get a handle on why it is so, and this certainly looks like a plausible theory (though you obviously don't like it).

Brave new world is certainly worth exploring (libertarians be damned). While I like the study's results insofar as they are in line with yours truly's admitted biases, I believe the policy prescription is not as stated. Credit rationing is likely to play a part in the future--especially if it gets scarce, and America certainly could use "objective" ways of determining who gets what when and where. Economists call it "comparative advantage," and I have no doubts about what America's largest problem is.

A true Popperian, I don't like saying others are "wrong" about their predictions of the future so I certainly can't say so here!

Emmanuel (loonie-across-the-pond)

Well, It's Come to This




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