Krugman’s Blog

There were 3 posts yesterday.  First was “Consumer Spending and Inequality Denial:”

I’ve been debating rising inequality with the usual suspects for a couple of decades (despite what it says on this piece, it was actually published in 1992). And what you always encounter from the right is a sort of defense in depth: claims, based on tortured statistics, that it isn’t happening; claims, based on similarly tortured statistics, that it doesn’t matter; and claims that anyway it’s a good thing. You might think that people would have to choose one of these lines: you can’t simultaneously say that inequality isn’t rising and that the rise is a good thing, can you? Well, yes you can; we’re engaged in a political defense of the 1% here, not research.

So, the latest is a piece by Donald Boudreaux and Mark Perry purporting to debunk the notion of middle-class stagnation. Their key piece of evidence is the claim that spending on “basics” has been steadily falling as a share of income, showing that people are finding it ever easier to meet the essential demands of middle-class life.

Jim Tankersley at Wonkblog does a partial debunking of the debunking, pointing out that the Boudreaux-Perry definition of “basics” is more than a bit dubious:

According to the Bureau of Economic Analysis, spending by households on many of modern life’s “basics”—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.

So, as Tankersley notes, autos but not gas to drive them; only food at home, in a two-earner-family society where at least some eating out has become a necessity; no mention of medical care or education.

But there’s a much bigger bait and switch here. Remember, the question is what’s happening to the middle class. Nobody questions the fact that America has grown richer over the past several decades. The question is whether that growing wealth has trickled down to ordinary families, or gone mainly to a small elite. Yet when Boudreaux and Perry invoke consumer data, it’s data for all households — in effect, mixing the top quintile (and the top 1 percent) with the middle class.

Does this make a difference? I’ve done a quick and dirty cut at the Consumer Expenditure Survey data, which unfortunately run only back to 1984, but which do give us spending patterns by income quintile. If you define “basics” as food, shelter, clothing, and transportation, it turns out that these basics accounted for 70.9 percent of overall spending in 1984, but fell to 67.0 percent in 2011 — suggesting some progress. But what’s driving that decline is the top quintile, whose spending on basics fell from 67.5 percent to 62.2 percent. The middle quintile’s spending share on basics was basically unchanged, going from 69.7 percent to 69.8 percent.

I’m sure that others can do a more careful and better cut here. But just consider what’s going on here: Boudreaux and Perry deny that the middle class is facing stagnation, and then they offer evidence that, on the face of it, is really telling us only that a growing share of income is going to the very affluent, who — surprise! — spend only a relatively small share of their high incomes on necessities.

I mean, if we had data for Ancien Regime France, I’d bet we’d find a relatively large share of total income going to things that weren’t necessities — wigs, formal gowns, servants, chateaux. Clearly, the French middle class was thriving in the 1780s!

The BR piece is, in short, a complete non sequitur — which, given the way the inequality debate has run all along, should come as no surprise.

Next he published “Look Ma, No (Human) Hands:

Felix Salmon has been converted to the cult of the self-driving car; indeed, this is starting to look like a real thing. And I’m impressed.

By and large, I’m in the camp of those disillusioned about technology — mainly, I think, because the future isn’t what it used to be. A case in point is Herman Kahn’s The Year 2000, a 1967 exercise in forecasting that offered a convenient list of “very likely” technological developments. When 2000 actually did roll around, the striking thing was how over-optimistic the list was: Kahn foresaw most things that actually did happen, but also many things that didn’t (and still haven’t). And economic growth fell far short of his expectations.

But driverless cars break the pattern: even Kahn’s list of “less likely” possibilities only mentioned automated highways, not city streets, which is where we will apparently be in the quite near future. And we’re also seeing a break with the pattern in which IT let’s you do great things in the virtual world, like share funny videos of cats, without having much impact on our physical lives; letting the robot drive while I, um, look at cat videos is a big change.

This could really change the whole way we live.

Now, my Luddite side rears its head since I have no idea if the videos he sometimes posts will show up properly.  But let’s give it a whirl, shall we?  His last post of the day was “Friday Night Music: What Is Time?”  Fingers crossed, here it is:

And where did the time go? A busy day, all of it on personal matters.

I’m doing a mini-book tour next week for the paperback of End This Depression Now!, starting Sunday at the 92nd Street Y in New York, then stops in NYC, DC, and Chicago. Blogging may be impeded.

Meanwhile, if this doesn’t make you smile, something is wrong with you:

 Nope.  No joy…  So here’s the link to the video:
Here’s hoping that worked!

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