5 ms·

> I'm fairly well acquainted with the literature on this topic How so, exactly? > and I think the opposite; the fact that most people don't understand why the

> I'm fairly well acquainted with the literature on this topic How so, exactly? > and I think the opposite; the fact that most people don't understand why these "nitpicks" actually seriously undermine the premise and totally butcher the prescriptive suggestions Personally, I'm inclined to withhold judgement until the dust settles, yay or nay. The topic is technically difficult, and there are a lot of actors with political interests in the outcome of the discussion that muddy the waters.

rayiner 7y ago
My biggest problem with Piketty & Saez's work is that it made pretty major economic policy prescriptions based on a model that was so simplistic that the result was borderline click-bait. And the end-result is that assertions have entered the political discourse ("the middle class's standard of living has been stagnant since the 1970s") that just aren't true. Let's unpack that. If you want to quantify the middle class's standard of living, you have to look at: 1) Post-tax income. 2) Prices/product quality/ 3) Benefits/services. 4) The characteristics of the middle class (age, race, immigration status, household size, etc). Piketty & Saez look at pre-tax income, apparently only because it's easy to assess via tax receipts. That overlooks data that's highly relevant to addressing deep and substantial policy questions. For example, consider what would happen if the U.S. and Mexico merged. Immediately afterward, median income in the U.S. would drop significantly. But nobody's standard of living would change. I.e. looking at the "median" fails to account for changes in who comprises the median. In the U.S. the immigrant share of the population has almost tripled from 1970 to 2017. Even if you've got a great economy that's good at integrating people and equalizing their incomes over time, it's probably not realistic to expect first generation immigrants as a group to have the same income as native born people. Looking at just pre-tax incomes completely masks that effect. Similarly, marriage rates and household sizes are down significantly since 1970. Married couples make significantly more money than non-married individuals. The median marired couple in Michigan has an income of $80,000, which is 45% higher than the combined income of the median single woman and median single man: https://www.mlive.com/news/2017/09/michigans_median_income_is_up.html https://www.mlive.com/news/2017/09/michigans_median_income_i.... Looking at pre-tax household income overlooks that effect entirely. There's a story in here somewhere. But Piketty and Saez's analysis doesn't actually tell us anything.
- dangerlibrary 7y ago
  You are mixing up correlation and causation re: married couples.
  - darawk 7y ago
    The relationship is causal. Married couples are a household. Married couples consist of two people. Two people is more than one person. Two incomes is more than one income, etc. Even though all married households are not dual income, those that are shift up the mean for the rest. This is an artifact of measurement via 'household'.
    - likpok 7y ago
      You've missed rayiner's argument, which is that the household income is more than the sum of the median man and the median woman. That is: two married people make more than two single people. There are a number of arguments you could make as to why (for example: married people tend older and so are farther in their careers), but it's not just "married households have two incomes and single households have one".
      - darawk 7y ago
        > There are a number of arguments you could make as to why (for example: married people tend older and so are farther in their careers), but it's not just "married households have two incomes and single households have one". Sure I didn't say it was the only explanation. But it is a sufficient one to prove the relationship is causal.
    - dennisgorelik 7y ago
      People who make more money are more likely to marry and to stay married.
      - mensetmanusman 7y ago
        True, but even poor people who decide to get married see a benefit relative to cohabitation.

rayiner 7y ago

My biggest problem with Piketty & Saez's work is that it made pretty major economic policy prescriptions based on a model that was so simplistic that the result was borderline click-bait. And the end-result is that assertions have entered the political discourse ("the middle class's standard of living has been stagnant since the 1970s") that just aren't true. Let's unpack that. If you want to quantify the middle class's standard of living, you have to look at: 1) Post-tax income. 2) Prices/product quality/ 3) Benefits/services. 4) The characteristics of the middle class (age, race, immigration status, household size, etc). Piketty & Saez look at pre-tax income, apparently only because it's easy to assess via tax receipts. That overlooks data that's highly relevant to addressing deep and substantial policy questions. For example, consider what would happen if the U.S. and Mexico merged. Immediately afterward, median income in the U.S. would drop significantly. But nobody's standard of living would change. I.e. looking at the "median" fails to account for changes in who comprises the median. In the U.S. the immigrant share of the population has almost tripled from 1970 to 2017. Even if you've got a great economy that's good at integrating people and equalizing their incomes over time, it's probably not realistic to expect first generation immigrants as a group to have the same income as native born people. Looking at just pre-tax incomes completely masks that effect. Similarly, marriage rates and household sizes are down significantly since 1970. Married couples make significantly more money than non-married individuals. The median marired couple in Michigan has an income of $80,000, which is 45% higher than the combined income of the median single woman and median single man: https://www.mlive.com/news/2017/09/michigans_median_income_is_up.html https://www.mlive.com/news/2017/09/michigans_median_income_i.... Looking at pre-tax household income overlooks that effect entirely. There's a story in here somewhere. But Piketty and Saez's analysis doesn't actually tell us anything.

dangerlibrary 7y ago
You are mixing up correlation and causation re: married couples.
- darawk 7y ago
  The relationship is causal. Married couples are a household. Married couples consist of two people. Two people is more than one person. Two incomes is more than one income, etc. Even though all married households are not dual income, those that are shift up the mean for the rest. This is an artifact of measurement via 'household'.
  - likpok 7y ago
    You've missed rayiner's argument, which is that the household income is more than the sum of the median man and the median woman. That is: two married people make more than two single people. There are a number of arguments you could make as to why (for example: married people tend older and so are farther in their careers), but it's not just "married households have two incomes and single households have one".
    - darawk 7y ago
      > There are a number of arguments you could make as to why (for example: married people tend older and so are farther in their careers), but it's not just "married households have two incomes and single households have one". Sure I didn't say it was the only explanation. But it is a sufficient one to prove the relationship is causal.
  - dennisgorelik 7y ago
    People who make more money are more likely to marry and to stay married.
    - mensetmanusman 7y ago
      True, but even poor people who decide to get married see a benefit relative to cohabitation.