Ep. 28 Income Mobility Really Does Exist, Paul Krugman

26 March 2016     |     Tom Woods     |     15

We managed to dig out some economics from yet another standard Krugman attack on the Republican Party. This time it’s his skepticism about the existence of very much income mobility in America. We’ll say this: if government programs had the record of success in this area that the (hampered) market economy has, Krugman would never let us hear the end of it.

Krugman Column

On Invincible Ignorance” (March 21, 2016)

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Contra Columns

U.S. Economic Mobility: The Dream and the Data,” by Leila Bengali and Mary Daly
The Impact of Taxes on Income Mobility,” by Mario Alloza
Krugman in the 1 Percent,” by Michael Tanner
Look at the Growth We’d Get from Less Government,” by Bob Murphy

Related Article

What’s Wrong with the Poverty Numbers,” by Bob Murphy (PDF)

Related Episode

Ep. 19 Enough About Inequality Already; Here’s the Truth

Episode Mentioned (Tom Woods Show)

Ep. 623 The End of School: Reclaiming Education from the Classroom (Zachary Slayback)

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  • Craig

    Apropos of Tom’s magnificent rant … I happened to have translated part of the following article today. Some countries are not so hopelessly proletarianized as the US.

    Perú es la quinta economía mundial con mayor emprendimiento
    ———————————————————–
    Peru is the fifth economy worldwide with the most entrepreneurship

    http://elcomercio.pe/economia/peru/peru-quinta-economia-mundial-mayor-emprendimiento-noticia-1796849

    Peru is located as the 5th economy of the globe with high
    indices of entrepreneurship, according to the measurements
    of the Global Entrepreneurship Monitor 2014 (GEM), which
    evaluated 73 countries, which represented 72.4% of the
    population of the world.

    [Chart]

    According to the report, Peruvians create their own enterprises
    motivated mainly for a business opportunity, more than because
    of unemployment. So, the motivation index which Peru displays is
    3.6, the highest in South America.

    According to IEDEP, for each new business created out of need
    for work, they create another five for the commercial opportunities
    that they see in the environment.

    Another characteristic of the Peruvian entrepreneur is their
    optimism. According to the report, 62.3% of Peruvians tend
    to be optimistic in their perception of opportunities, some
    69.4% feel that they have entrepreneural ability and only
    29.1% display their fear of failure.

    In the matter of the projection of the start up of enterprises,
    50.6% of the population between 18 and 64 is thinking of starting
    a business within the next three years.

    “Some 82.4% of the population between 18 and 64 thinks of
    entrepreneurship as a good choice of a professional career,
    which is a percentage that puts the country forth in the world
    in said judgement.”

    ***

  • JdL

    To skip directly to the rant, download the .mp3 and fast forward to 22:00. Not to criticize the contents before then, but I did go a bit cross-eyed trying to follow every subtlety. If you’ve had plenty of caffeine, run through the whole thing. 😉

  • charper140

    Nice rant! As a society, we’re so in love with the free babysitting public “schools” provide that we’re completely missing the harm being done to our kids. On the front side of the equation both parents get to go to work, but on the back end you have kids that can’t move out because they are completely disconnected from the economy and how to earn a living. The free babysitter wasn’t so free after all.

  • Lodewijk Hof

    As a partly sighted person from Europe, with lower chances with a big welfare state than someone with the same eye issue from Pakistan, I can say we need more enterpeneurs.
    The idea that cutting tax is working is just common sense. The idea that government could work something out is just a myth.
    For the cruise a suggestion: next year one in the Middle East or Asia

    • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

      Middle East!?!?! Are you trying to get us all killed? You know and I know that libertarians are the last guys Islamists should be trying to kill,… but I very much doubt that they are capable of figuring this out at all! Check out What Does Islam Teach About Violence http://www.thereligionofpeace.com/pages/quran/violence.aspx for more.

      • Luke Perkins

        I’m sorry, Hunt, but a bunch of obviously peacefully protesting people, carrying a sign I very much agree with, while grinning and waving at someone on the sidelines, hardly constitutes evidence “they would kill us all.” I mean, seriously, I don’t even see firearms in this picture.

        Perhaps you have a translation of some of the Arabic which demonstrates a more violent message? Or perhaps a different picture is in order?

        • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

          Point taken.

          Here is one place I get my views on this subject What does Islam teach about violence? http://www.thereligionofpeace.com/pages/quran/violence.aspx

          And I’ve been listening a great deal lately to Stefan Molyneux on the subject of Islam. There would seem to be fairly clearly evidence that Islam is a proselyting faith that explicitly encourages and excuses the use of violence and fraud in promoting itself. Given the many provocations the West has inflected upon the Arab world lately,… and a reasonably coherent supernatural rationalization to really stick it to the West,… makes me nervous about the ability of the West to tolerate, within our own borders, an often explicitly intolerant ideology/faith. I truly hope my suspicions are wrong. But sometimes one has to really consider what the worst elements of one’s potential new citizen immigrants are saying.

          Consider that there are many Muslims in the world who would kill me for posting the following infamous depiction of Mohammad, peace be upon him. https://uploads.disquscdn.com/images/52f31d989d7e1aa0741454f69aeb326aae5c93e05b8587211f4111993752a5e8.jpg

          • Luke Perkins

            I suppose if you wish to hold all Muslims responsible for the actions of all Muslims, you will also have to hold all Christians responsible for the actions of all Christians.

            You therefore should desire to see Christians deported for the shootings at Planned Parenthood, be concerned about the silence regarding the Westboro Baptists, and think all Christians stupid for believing the Earth is 6,000 years old.

            I haven’t gone through the site you linked, but if it’s anything like the others I have seen, it will do a very good job of portraying the violent terrorists’ perspective without providing any countervailing opinions from other Islamic groups. That would be like if I put together a website showing how the Westboros perfectly interpret the Bible, or how YEC beliefs exactly match Genesis. Rather disingenuous if you ask me.

            However you slice and dice it, Islam and Christianity both have nut jobs, yes, even violent nut jobs, and neither does a great job of denouncing said nuts simply because there is no point in trying to reason with such people (YECs can get *really* angry if you try to point out evidence against their position). So the real issue is the world circumstance where so many people are attracted to the violent nuts in Islam.

            Now, I wonder, if a Muslim nation were doing to America what the “Christian” nations are doing to the Middle East, how many violent Christian groups would spring up? I don’t know, but the IRA and KKK come immediately to mind for some reason….

            Don’t get me wrong, I don’t think Islam is the correct understanding of the universe, but if it were truly “inherently violent,” how come there are only an estimated 20 million (CIA numbers) terrorists world wide instead of 1 billion +? How come the Muslim kingdoms of the Middle Ages were more peaceful than Christian Europe? Does Islam really have just 20 million “true” Muslims and a billion plus “cultural” Muslims?

            I find that rather hard to believe.

  • Adam

    Are there any good articles on wealth inequality vs wealth mobility? I understand the concept of moving up the pay scale as you get older and therefore ending up in different income brackets, but how easy is it to move into different wealth brackets? I speak as someone surprised to find that I am in the top 5% on the income distribution but I feel like I am still way behind where I need to be on savings, etc. I suspect a large reason for the difficulty in accumulating wealth stems from government inference in the free market causing the cost of living to increase, but I don’t know how to quantify it. I’m sure I’m partly to blame with some of my spending decisions, but I do not have a super extravagant lifestyle.

  • Jake Wiggins

    Here is a link to the Thomas Sowell article that Tom refers to if anyone is interested. (http://townhall.com/columnists/thomassowell/2013/03/06/economic-mobility-n1525556/page/full)

  • Adrian Gutierrez

    Great Stuff from both of you guys, and thanks to Mr Woods for stressing the uselessness of public schools. Schooling is not education.

  • paul

    dr. woods, you’ve touched on this specific point in a couple of episodes – that a distinction should be made in terms of the behavior of each wealth quintile over time vs that of the individuals who populate each quintile. there was a reddit thread a while back which discussed this topic, based on a simplified economic “simulator” program written by peter norvig (director of research at google):

    https://www.reddit.com/r/programming/comments/1vrkoe/economics_simulation_by_peter_norvig/?sort=new

    i thought the analysis was lacking in exactly the same way you emphasize – it focused on statistical trends instead of looking more closely at the individuals. so i modified the code to also trace the mobility of individuals representative of each quintile at t=0 in the simulation. i added gini coefficient and mobility matrix calculations, since those are 2 popular ways of examining inequality/mobility in the literature.

    plots using different initial wealth distribution and re-distribution methodology:
    http://imgur.com/a/Mn9eD#0

    the simulation is fairly primitive in terms of how “wealth exchange” takes place, which is something i’d like to improve upon using some small set of simple rules governing the interactions. i just haven’t found the time or understanding to design these rules yet. this simulation also doesn’t account for creation of wealth, which should have an important role if one wants to more accurately describe a realistic economy, nor are population changes (dr. murphy points out the importance of this factor in ck28). regardless, the result is a useful tool to visualize the differences in behavior between a statistic and the individuals from which it was derived.

    not certain if you or dr. murphy have come across this particular reference for income mobility matrices, if not one more to add to the pile:
    http://www.urban.org/publications/406722.html

  • http://blog.monstuff.com Julien Couvreur

    The link for ““What’s Wrong with the Poverty Numbers,” by Bob Murphy (PDF)” appears to be broken.

    I was looking for Romer & Romer’s study on tax cuts in case anyone could share a link.

  • Георги Ганев

    The link to Bob’s “What’s wrong with the poverty numbers” given above is broken, but obviously the FEE have reorganized the site, so now the link is:

    https://fee.org/articles/whats-wrong-with-the-poverty-numbers/

  • UsedtobeaSuitBoi

    Really hope you get James Altucher on one of your podcasts one day, Tom.