Monday, September 20, 2010

Paul Krugman, class warrior

Unlike Paul, I know the difference between a stock (wealth) and a flow (income). I would have thought that distinction might come up in the economics of trade now and again.

To be honest, I suspect this column owes more to effort avoidance - column due and no ideas or no time to do research - than it does to anything else. Rants take a lot less effort than thinking.

2 comments:

asociologist said...

Jeff,

I am confused. Where is Krugman mistaking a stock for a flow or vice versa? Are you saying that calling those who make more than $400,000/year "rich" conflates their flow (of income) and their stock (wealth)? If so, that makes sense, but I'm not sure it matters much to the argument. The correlation of wealth and income is in now way perfect, but those making $400,000 have a lot more wealth (on average/as a group) than those with incomes near the median. Or are you being more subtle and I'm missing something?

econjeff said...

I am indeed making the simple point suggested by "asociologist" but I think it does matter to the argument for two reasons. First, "rich" is pejorative, while "high earnings" is not. The use of the inaccurate term is motivated by a desire to mislead the listener into thinking that the suggestion is to raise taxes on Warren buffet rather than on, say, families where both adults are doctors or lawyers. Second, my understanding is that the data suggest that a surprising number of high earning households live more or less paycheck to paycheck (and so have low wealth) while many retired people have low earnings but relatively high wealth. More broadly, I think one of the social responsibilities of academics is to encourage honest and precise use of language. Krugman passed up a good chance to do that here.