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Home Publications Blogs Beat the Press David Brooks Shows That You Can Just Say Anything in the NYT

David Brooks Shows That You Can Just Say Anything in the NYT

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Tuesday, 15 February 2011 05:16

After rising rapidly in the 30 years following World War II, living standards for most people in the United States stagnated. The typical family has seen very modest gains in income since 1980. The data show that part of this slowdown stems from a slower rate of productivity growth and part of it stems from an upward redistribution of income.

The upward redistribution of income can be directly traced to a number of policies that were designed to have this effect. For example, we have a trade policy that subjects U.S. manufacturing workers to competition with low-paid workers in the developing world, while largely protecting doctors and lawyers and other highly paid professions.

We have had a Federal Reserve Board policy that explicitly puts downward pressure on the wages of these same workers in order to ensure that inflation stays low. The government has also repeatedly propped up the financial industry, allowing the top executives at major banks to earn vast fortunes. And, it has directed vast amounts of income to drug companies and the entertainment industry through patent and copyright monopolies.

All of these facts are evident to anyone who cares to look. But David Brooks tells us that the reason that we have seen fewer gains in living standards for the bulk of the population is that the rich want to work less than they used to. There is not one iota of data given to support this position, which seems to fly in the face of the evidence that average hours worked for most of the workforce fell rapidly in the first half of the 20th century. It largely stagnated for full-time male workers in the last three decades. (It rose for women.)

In other words, Brooks has absolutely zero evidence for this little story of the stagnation of living standards. But, hey why would anyone expect an evidenced-based column in the New York Times?

Btw, I forgot to beat up on Brooks for another major mistake in his article. He makes a point of telling us that:

"Facebook employs about 2,000, Twitter 300 and eBay about 17,000. It takes only 14,000 employees to make and sell iPods, but that device also eliminates jobs for those people who make and distribute CDs, potentially leading to net job losses.

In other words, as Cowen makes clear, many of this era’s technological breakthroughs produce enormous happiness gains, but surprisingly little additional economic activity."

No, this is 180 degrees wrong. In fact, if new devices, software, or ways of doing business are creating great gains in living standards, as Brooks claims, but require very few workers, then this suggests that they are leading to an enormous amount of economic activity. It is possible that our measures of GDP are not picking up these gains, but if these new innovations are really as important to people as Brooks' seems to believe then the issue is simply one of measurement, not a lack of economic activity.

As a practical matter, economists always know how to create jobs -- we can just have workers put in fewer hours, as one obvious route -- it is only incompetent and/or corrupt politicians who stand in the way of a full employment economy.

Comments (12)Add Comment
Shoving issues under a rock
written by deanx, February 15, 2011 6:15
I read in it 'Blame the Victim' for their own suffering. The hypothetical 'Sam' and his grandson, were reinforced with completely hypothetical and heresay data.
Sam I Am ... And Am Not
written by David S., February 15, 2011 8:05
A major problem with this Brooks column is that if fails to distinguish between wealthy families, on the one hand, and middle class and lower income families on the other.

Sam obviously left a family fortune to Jared, who relies upon that unearned bequest to engage in a life less driven by the profit motive, although he does produce value through the conference work he performs. Nonetheless, his trade-off on the labor:leisure scale is dramatically different than the trade-off for middle class and poorer Americans who made the stupid choice of being born into less affluent circumstances.

Instead, the Americans -- the vast majority -- must make a much different trade-off, sometimes working two jobs, sometimes finding no jobs at all, while trying to make ends meet.

The wealthier Jared may indeed be creating fewer job opportunities than did his grandfather Sam. The question is: What will we as a society do about that?

Keynes wrote about the economic possibilities of our grandchildren, in a book which imagined a future many decades beyond when he was writing. He hypothesized a world in which work weeks were shorter, as the growing stock of capital, and increases in productivity allowed many people -- not just the Jareds of the world, to make better trade-offs between labor and leisure, in order to cultivate their human qualities.

Alas, we are hardly at that position in this country, since, despite the gains in wealth and productivity, the maldistribution of income has precluded the dissemination of these benefits over the life span of the fictional Jared.
...
written by skeptonomist, February 15, 2011 8:52
It should also be mentioned that tax rates, and specifically tax rates for the rich, are much lower than they were during those 30 years of prosperity after WW II. It's not just that there is zero evidence of conservatives' claims about incentives, there is massive evidence that tax-cutting and other conservative policies have reduced incentives for entrepreneurs and managers to do useful work, rather than get-rich-quick speculation.

Even liberal economists have generally accepted the conservative conventional wisdom that incentive to be useful economically is directly proportional to immediate compensation. This is as false empirically as the Laffer curve.
if brooks says pittsburgh is gonna win, then bet...
written by frankenduf, February 15, 2011 1:08
Krugman layeth the smacketh down in his blog post on this today- turns out that the highest decile wage earners are working MORE hours today than in the past- so if brooks handed this tripe in as a 10th grade poly sy paper, would it eke out a D+ for effort?
how many workers
written by Steven Sherman, February 15, 2011 2:07
Is it the case that only 14,000 workers are involved in manufacturing Apple products, such as the Ipod? Seems like most of them are in China in any case, and a lot of the processes are probably hidden in subcontracted firms also in China. Satisfying Jared's needs for new gadgets, clothing, furniture etc has been a major driver of the expansion of jobs in China. Jared actually lives in a world of manufactured goods, even more so than Sam. It takes people and economic activity to make those goods, including delivering them to him.
...
written by Floccina, February 15, 2011 4:27
We have had a Federal Reserve Board policy that explicitly puts downward pressure on the wages of these same workers in order to ensure that inflation stays low.


IMO when they deviated from that policy it 2001 to 2005 it led to the housing bubble. I think that your idea of stopping the housing bubble through regulation without raising interest rates would have lead to damage elsewhere.
I've always wondered
written by John P, February 15, 2011 6:07
why I don't see so-called prominent economists suggest that wage stagnation is due precisely to lower top marginal tax rates introduced in 1981.

It's pretty obvious to me. When rates were 70-95%, the bottom 90% of earners took home the majority of income gains year after year. That reversed dramatically following Reagan's first big tax cut in 1981.
The
written by diesel, February 15, 2011 7:22
I'm having trouble getting past the part where Sam was born in 1900 and his grandson in 1978. Assuming Sam sired Jared's dad when he was 24, that would mean that Jared's dad was 54 when Jared was born. Was Jared the progeny of his father's second, middle-aged -crisis wife? The proverbial twenty-something golddigger? And what was Jared's dad doing while Sam rode herd over his brake empire? Isn't there a step missing? Wouldn't dad have been an executive, lawyer or dentist? And what became of Jared's older step siblings? Isn't one of them a counterculture bum living on a boat in Tahiti and another a quirky genius mathematician? So many questions Brooks left unanswered....I guess we'll have to wait till next week for another dramatic installment from the BrooksMan.
the bottom 50% pay abs. 0 income tax!
written by pete, February 15, 2011 9:34
Sort of confused by John P. Top 2% pay what, 20% of income taxes. How much blood is in that turnip. Bottom 50% of folks pay nuttin honey. Whaddya want the bottom 75% to pay nuttin??? Maybe Bill Gates and Buffet can pay all our taxes.
...
written by Matias Vernengo, February 16, 2011 1:21
Yes, incompetent and/or corrupt politicians with the ditto economists. Let's not forget that some economists have a share of the guilt for not creating full employment.
...
written by liberal, February 16, 2011 8:41
Floccina,

I think that your idea of stopping the housing bubble through regulation without raising interest rates would have lead to damage elsewhere.


Doubtful. An easy back-of-the-envelope calculation shows that cheaper cash was not a main contributory factor to the increase in valuations during the bubble.

You could argue that due to nonlinear effects, it had something to do with launching the bubble, of course.
The rich get off easy
written by FoonTheElder, February 22, 2011 3:37
The IRS reported top 400 earning taxpayers paid a federal income tax rate of 17% on their adjusted gross income, based on inflation adjusted income that had more than doubled since the early 90s.
http://www.irs.gov/pub/irs-soi/07intop400.pdf
p.9

When you compute all taxes as a percentage of all income, the top 1% pay less of a percentage of their income than the next 19% and not much more than the next 60% after that.
www.ctj.org/pdf/taxday2009.pdf

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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