I can tell a straightforward, partisan story about inequality in the United States:
- The colonial United States was a remarkably egalitarian place — for white people, at least. But as the United States industrialized, from the Civil War through the Gilded Age and all the way until the Great Depression, the government made few efforts to redistribute wealth, and inequality grew and grew.
- Franklin Delano Roosevelt’s New Deal policies reduced inequality dramatically and established a bipartisan consensus in favor of egalitarian redistribution that lasted for decades. Democrats controlled the White House and Congress for most of these years, and even the two Republican presidents elected during this time — Eisenhower and Nixon — basically accepted the New Deal consensus. During this time, inequality remained low and even declined slightly.
- But backlash against the Civil Rights Act ultimately shattered public confidence in Big Government, eventually leading to the election of Ronald Reagan in 1980. After this point inequality began to rise again, such that today we once again see levels of inequality we haven’t seen since the Gilded Age.
This is a common story — for example, it’s pretty much exactly the one Paul Krugman tells in The Conscience of a Liberal.
The 2019 college admissions scandal (sentencing underway) brought a wave of thinkpieces and cheeky tweets on the meritocracy, with the consistent message that America isn’t one. Two critics of meritocracy got a lot of name-checks: Michael Young, who invented the term in Rise of the Meritocracy, and Chris Hayes, whose more recent Twilight of the Elites: America After Meritocracy now seems shockingly prescient. Both warn that meritocratic ideology is dangerous, but the dangers they each point to are quite different.
Alex Tabarrok, a libetarian economist who writes for Marginal Revolution, has a new paper out: Is regulation to blame for the decline in American entrepreneurship? No, he finds. I admire his intellectual honesty, but I question his definition of “economic dynamism.”
There’s a book, by Scott A. Shane, called The Illusions of Entrepreneurship. Shane explains that there is a huge gap between what we imagine when we think of “entrepreneurship” and the reality of what the go-to statistics describe. Things like the “rate of new startup formation” are dominated overwhelmingly by the churn of things like laundromats, taco trucks, and lawnmowing services, not by firms driving the adoption of new technology or economic growth. Think of people you know who own small businesses – would any of them be excited to hear that the rate of entry and exit into their market has gone up? And would you, as a consumer, be happier if the rate of laundromats in your neighborhood opening up and closing down were high or low?
Countries that do have high rates of entrepreneurship tend to be developing countries where many ambitious people are excluded from the formal job market – and often, small business in developed countries are run by immigrants or others whose access to domestic employment networks is limited. These are not signs of economic health, so if we want to measure “economic dynamism” in the sense we imagine it – the adoption of new and better technologies and business techniques – we need different metrics.
Today I went digging through my hard drive for a research paper I wrote in policy school that used structural equations modeling to analyze the 2004 United States presidential election. Sadly, it seems I lost the final version and only have a rough draft. I did, however, find another research paper on population changes in Wayne and Oakland counties (roughly, Detroit and its wealthier suburbs.)
You might find it interesting if you like Detroit or pretty choropleths:
Some mixed, sort-of tooting my own horn: I independently discovered one of the most important urban trends in the United States – the dispersal of poor, urban blacks to inner ring suburbs, which in many ways laid the ground for the recent conflict in Ferguson. Of course, by that time, the professionals had already discovered it.
I also found, in retrospect, absolutely no evidence for gentrification in Detroit from 1990-2000; at the time I worded my conclusion a bit more weakly, probably because no one I talked to wanted to hear this conclusion. Fortunately, I’m coming to care less what others think in my old age. Also in retrospect, the most likely cause of the changes I observed is the Third Great Migration.
I guess I’ll take a stab at explaining the lost structural equations modeling paper as well.