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Yes, one such book is Thomas Sowell's "Basic Economics" 5th Edition. Page 209 says... > A simultaneous rise in rewards for work and a growing welfare state tha

by RhysU 1y ago

Yes, one such book is Thomas Sowell's "Basic Economics" 5th Edition. Page 209 says... > A simultaneous rise in rewards for work and a growing welfare state that allows more people to live without working virtually guarantees increasing inequality and earnings and incomes, when many of the welfare state benefits are received in kind rather than in money, such a subsidized housing or subsidized medical care, since those benefits are not counted in income statistics.

mempko 1y ago
So he's arguing that inequality increases with the welfare state? Doesn't that contradict the claim made earlier? Or am I misunderstanding the quote?
- RhysU 1y ago
  Sowell's arguing that neglecting to include welfare transfers makes inequality look worse than it is. Especially when there are stark differences in earnings as a consequence of working. If you earn $5 and the state gives you $45 in assistance, you practically have $50. If I earn $200 and the state taxes me $100, then I practically have $100. The income inequality is 40x but the practical inequality is 2x. Current common metrics would report 40x, in this contrived example, is the point Gramm and Sowell both make. Their observation that transfers and taxes are neglected when measuring income inequality is self-evidently true and frequently overlooked. Be careful with income inequality conclusions. The first chapter of Gramm's book calls out that difference between the hours worked in the various income quantiles is large. Sowell makes the point that the age demographics vary considerably across the quantiles with very young and very old people working less and therefore frequently in the lower quantiles. Sowell further points out that different US demographic groups have different mean ages so that one can explain some seemingly-demographic-related inequality by age differences. Both books are recommended.

by RhysU 1y ago

mempko 1y ago

So he's arguing that inequality increases with the welfare state? Doesn't that contradict the claim made earlier? Or am I misunderstanding the quote?

RhysU 1y ago
Sowell's arguing that neglecting to include welfare transfers makes inequality look worse than it is. Especially when there are stark differences in earnings as a consequence of working. If you earn $5 and the state gives you $45 in assistance, you practically have $50. If I earn $200 and the state taxes me $100, then I practically have $100. The income inequality is 40x but the practical inequality is 2x. Current common metrics would report 40x, in this contrived example, is the point Gramm and Sowell both make. Their observation that transfers and taxes are neglected when measuring income inequality is self-evidently true and frequently overlooked. Be careful with income inequality conclusions. The first chapter of Gramm's book calls out that difference between the hours worked in the various income quantiles is large. Sowell makes the point that the age demographics vary considerably across the quantiles with very young and very old people working less and therefore frequently in the lower quantiles. Sowell further points out that different US demographic groups have different mean ages so that one can explain some seemingly-demographic-related inequality by age differences. Both books are recommended.