Tuesday, August 22, 2006

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Blog debate on government policy and income inequality

Let me recap the blog debate over the extent to which government policy is responsible for increases in income inequality in recent decades, set off by this Paul Krugman column from last week.

No, that would take to long. Let me just link to this Brad DeLong post and this Tyler Cowen post and strongly recommend that you click through.

posted by Dan on 08.22.06 at 08:39 AM


Some interesting debate-- below is one argument from DeLong's blog that I hadn't hear before and I think has some merit (a little extreme in tone, but the gist of the argument should be considered):

Graydon: The kicker is what kinds of corporate organization are permitted, not tax policy. The relentless push for de-regulation and for restructuring law related to markets has converted a machine intended to secure the general prosperity into a machine to concentrate wealth. (This started around 1970, with the creation of the formal obligation for a corporation to maximize monetary returns to the exclusion of all other considerations.) Organizational patterns and structures matter. Tax policy is not even vaguely important compared to, frex, what banks are allowed to do, and that is often both governmental and policy set by non-legislative means. The general conflation of wealth and virtue isn't any help, but the core problem is that profit is legally regarded as an excuse to do almost anything.

posted by: Rick Latshaw on 08.22.06 at 08:39 AM [permalink]

It may be heresy to say this, but growing income inequity has very little to do with govt policy and ALMOST everything to do with the dramatically increasing world trade. Prof Drezner, I suspect that you disagree with this, but perhaps you would like to comment on the theory that increasing fungibility of workers decreases the market value of their work.

posted by: OpenBorderMan on 08.22.06 at 08:39 AM [permalink]

As opposed to government policy, I wish someone would debate the extent to which stock option grants are responisble for income inequality!

posted by: Neptune on 08.22.06 at 08:39 AM [permalink]

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