Sunday, July 23, 2006

But Its Not A Race

Paul Krugman ($$) is concerned about income inequality. Without even considering the counter arguments here and here Paul fails to persuade me that I should be concerned.

in 2004 the real income of the richest 1 percent of Americans surged by almost 12.5 percent. Meanwhile, the average real income of the bottom 99 percent of the population rose only 1.5 percent. In other words, a relative handful of people received most of the benefits of growth.

First, it’s hardly surprising that the vast number of Americans that take no risk and have no scarcity power are not finding their wealth growing quickly. I’m not 100% certain who is contained in that top 1% , but my guess is that its entertainment stars, sports stars, doctors, lawyers, business owners and CEOs. Business owners and CEOs take great risks (especially in today’s world of Sarbanes Oxley), so are compensated in kind. And the other categories are scarce resources - as we all grow wealthier, there are more of us demanding their services.

Secondly, Krugman and his analogues seem to want everyone to enjoy the benefits of capitalism and share in none of its risk. How likely is it that Krugman would advocate a policy where everyone had to decrease their wealth in line with the top 1% when times are not so good? Maybe everyone should have gotten a 6% paycut from 2000-2004 to put them in line with how the top 1% faired during that time?

I, for one, don’t know how you can complain that everyone is winning, but some are winning more. How desperate do you have to be to find something to complain about when this is the best you can come up with?

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