17 Dec 2013

Scott Sumner Wants to Take Income Away From All of Us

Economics, Matt Yglesias, Scott Sumner, Shameless Self-Promotion 13 Comments

In a post titled, “Income is meaningless, example #388″ Scott quotes from Matt Yglesias who wrote:

One issue this poses is that analysis of political issues in terms of “income” quartiles can get pretty misleading. A married couple where dad earns $65,000 a year and mom works part time bringing home $15,000 a year is in the fourth quartile of the American income distribution. A 70 year-old widower whose $2 million in savings bring him an annual income of approximately $80,000 is also in the fourth quartile. But their policy-relevant economic interests are unlikely to have very much in common since in reality their financial situations are entirely dissimilar.

Yglesias had it right (in this quote, I didn’t read his whole post): The political jockeying over “income” can get pretty misleading. Yes, that’s exactly right, and everybody who is going to think through such issues had better be aware of the kind of complications Yglesias (and Sumner in past posts) brings up.

But that doesn’t mean income is “meaningless.” I responded in the comments:

Why stop at “income” Scott? These 388 examples all show that numbers are meaningless. Look at how much people are confused by the use of numbers! Meaningless. What the heck is “80,000″ anyway?

(For a more serious defense of the economic concept of income, see this article.)

13 Responses to “Scott Sumner Wants to Take Income Away From All of Us”

  1. Major_Freedom says:

    Seems like a monetarist wanting to destroy all nominal statistics but their own (NGDP) is kind of like a theist wanting to destroy all Gods except their own (Yhwh)

    • Bob Murphy says:

      In other words: “This Christmas carol reminds me of a Gary North post….”

      At least now you can understand the phenomenon MF.

      • Major_Freedom says:

        I can appreciate that quip, and I’ll admit there is a similarity there. But unlike the other guy, I have believed for quite some time of the connection I implied. Ever since I learned about it, NGDP targeting (indeed any socialist central plan) is a form of God worship. It’s an aggregate, all encompassing concept. It is to be regarded as fixed and immutible. It is claimed to be a source of social stability. We are not to violate its prominant position by demanding that individuals, all together, should be able to make that statistic anything they want in a world of individualist economic anarchy. It is given capital letters. It is praised above individual humans. It is hoped and yearned to be given to everyone by the economic high priests in the government.

        I think there is enough difference between my post and the other guy’s post that I don’t think I should have to understand his thought processes given what I said. But I can see what you mean. It was kind of arbitrary for me to say it.

        • BZ says:

          Yea! What kind of anarchist wants to leave Christ on the throne? What sort of sheeply statist follows the law of gravity blindly?

          • Major_Freedom says:

            Christian anarchist, and every one, respectively.

  2. Rick Hull says:

    I’d be curious what Sumner objects to in the Mises Daily piece. Alternatively, maybe he doesn’t object and just owns up to (mis)using hyperbole in his blog posts.

  3. Milton Friedman On Income Differences says:

    [...] of income differences, Bob Murphy reminds us of an important point that is typically ignored. (Be sure, when at Bob’s post, also to click on his link to his earlier essay.) Be Sociable, [...]

  4. Gamble says:

    I don’t know.

    Seriously, I don’t understand what Bobs point is?

    I read the quote from Matt and it makes sense. An elderly person earning only interest will vote differently than a younger family with 1.5 incomes. I agree with this. These 2 examples have identical income yet disparate politics.
    therefore income is a useless factor when predicting voting .

    What am I missing?

    • Bob Murphy says:

      Gamble, you’re missing the fact that Scott Sumner is saying “income is meaningless.” He doesn’t append, “…when predicting voting.” He is saying period, we as economists and policy wonks don’t need to use the concept of “income.”

      Go look at my article and links to my arguments with Scott on his blog if you think I’m exaggerating.

      And by the same token: “The number 80,000 is useless when it comes to predicting voting, as Yglesias showed. So 80,000 is meaningless.” Does that sound right to you?

      • Gamble says:

        Okay Bob,

        I followed the link to your Mises article and then I went to the Money illusion blog.

        I agree with you that income is not meaningless. Rather than try to explain what income is and what type of income should be taxed at what rates, I will simply say what I have been saying for a few years. Feel free to ignore or dissect.

        The government confiscates all the fruits from all our labor, destroys most of it, redistributes some of it and returns very little of it.

        • Major_Freedom says:

          “The government confiscates all the fruits from all our labor, destroys most of it, redistributes some of it and returns very little of it.”

          Keeps us all more easily employed producing the more popularly desired goods and services, right?

          Less thinking involved. More easily controllable. Fitter, happier, more productive.

          • Gamble says:

            Subjects of the State. We only think we are in control of our future.

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