From: demon@desire.wright.edu (Stupendous Man)
Newsgroups: talk.politics.misc,sci.econ
Subject: Re: Look Back in Anger
Date: 17 Nov 92 18:05:36 EST
Organization: Demonic Possesions, Inc.

In article <92322.071734DGS4@psuvm.psu.edu>, <DGS4@psuvm.psu.edu> writes:
> In article <1992Nov16.131926.5633@desire.wright.edu>, demon@desire.wright.edu
> (Stupendous Man) says:
                                         |
		     This should be 1.6% v
>>        The growth rate improved from 2.6% during the 70s (actually 1973-1982)
>>to 3.5% (1983-1990).  WWII-1972 was 3.6%.  Certainly the affect was to raise
	(1982-1990)

>>the GDP growth rate.  It's even more impressive when you realize that this
>>growth was achieved during the most intensive period of global competition
>>ever.  A lot of the post WWII growth in GNP was largely because no one else
>>was around to sell.
> 
> Can you say, "selection bias"??

	Sure I can say it, but it's not meaningful.  We're discussing
supply-side and Reaganomics.  Which were ineffect from 1982-1990.  Thus the
selection period.  Now if I wanted to talk Keynesian, I would pick a different
time frame.

>  You exclude several years which

	I exclude years only if Reaganomics were not in effect.  If I'm trying
to demonstrate whether Factor X is successful, I certainly do not include
periods where Factor X is not present, except to provide contrast.

> assist in the production of your numbers.  Most economists will tell you
> not to measure GDP growth from beginning of expansion to end of expansion
> as you have done in the latter period.  In any case, long run

	Only if you want to compare recovery vs. recovery.  We're measuring
improvement in the economy, which means start of Reaganomics to end of
Reaganomics.

> GDP growth depends on productivity growth.  The rate of growth of
> productivity in the U.S. still remains far too low.

	Compared to what?

>>> his competition?  By looking only at the finish line, you ignore
>>> important information.
>>
>>        Exactly, which is why we need to examine who much each sector of the
>>population improved/declined.  Those making $25k and less improved their net
>>worth by 19% during the 83-90 expansion.  (All numbers have been real gains.)
>>        The lowest gain of any part of the population, but also the only part
>>of the popluation that depends on the government for a significant portion of
>>their "income".  (Quotes because direct payments are not include as income for
>>almost every economic stat you can name.)
> 
> As I said, that's no better income mobility than in other periods of
> recent memeory.

	And we're still waiting for the numbers to back that up...

>  So what's the big deal?  Reagan's policies did not
> change income mobility.  Am I supposed to consider that an accomplishment?

	All income groups gained, is that not an accomplishment?  What is your
yardstick for economic success?

...
>>        My point is that often attempts by the government to "equalize"
>>backfire.
> 
> My point is that Reagan did not improve mobility, 

	Prove it.

> did not improve long-term
> growth, 

	He doubled it.  If that is not improving it, what is?

> but did increase inequality.  

	How so?  The rich gained 23% while the lower middle class gained 35%
and the upper middle gained 29%.  Which part was unequal?  The rich certainly
didn't gain more than the middle classes.  The poorest performers are the ones
depending on the government.  It's pretty clear which policies make better
economic sense.

> Since this thread is in sci.econ
> tell me what the economic value of inequality is.  I would argue, as most
>
	Strawman.

>  economists do, that inequality serves to motivate differential efforts.
> It makes entrepreneurs risk capital for reward.  In the course of that
> the general standard of living is improved for all people.  Yet, Reagan's
> increase in inequality has not done that.

	It did.  I invite you to start posting numbers.  This is sci.econ,
after all.

...
>>> What is the purpose of inequality in a free market?  Isn't it to motivate
>>
>>        There is no "purpose" to inequality.  Inequality is a derived figure.
>>It's not a natural part of the system.  It has to be introduced by people.
>>You'll get into a circular logic loop by trying to prove that free market
>>systems are bad because of inequalities.  Free markets have nothing to do with
>>artificial limits/quotas/etc.
> 
> I suggest you re-read Adam Smith.  Inequality is a natural result of the
> free-market economic system.  

	I think you are confusing the reward from risk as inequality.

> It results from differential rewards as
> a result of differential productivities, as well as differential
> endowments.  Economic theory clearly shows that under certain conditions
> you can alter the endowments to get a desired Pareto-optimal result.  That

	Economics is not a zero-sum game.

> raises the political question of whether a people can and should use
> government powers to achieve a desired result.

	Why should we let government, a proven inefficient market lever,
control the economy?

> You really should be more consistent Brett.  Earlier you said that if
> a teacher didn't allow work to be rewarded with differential grades
> than everyone would only try to get C's.  

	You might read a little closer.  I said people would work up to the
point of getting a C.  A subtle distinction, by evident in many socialist
systems where five people are sent out to dig a ditch so all can receive
payment for "work" done.

> Isn't the "purpose" of grade
> inequality to motivate differential effort?  

	You really have a strange definition of inequality.  The difference in
grades comes form a difference in work done.
	But if you follow the labor theory of value, you can't admit that, can
you?


> Inequality most certainly
> has a fundamental purpose in free market economics.

	It would probably help others if you defined inequality, instead of
simply labeling economic gain as "a result of inequality".

>>> effort?  Doesn't that motivation result in increased growth rates that
>>> benefit all?  Isn't that the one of the main purposes behind free markets?
>>
>>        Free markets simply are.  It's not like they have programmed
>>responses.
>>Free markets remove restrictions from gains and losses and risk.  If you want
>>to term this an inequality I can't agree with you.  Generally the higher the
>>risk the greater the potential reward, but that's not inequality.
> 
> O.K., now I see the difference between our defintions of inequality.
> By inequality I mean measured differences in income/wealth (using
> common measures like the Gini index).  In the most basic terms the
> measured inequality that we see in a free market results from two
> sources, differential endowments and differential productivity (notice
> I am assuming away that there might not be a strict connection
> between productivity and the reward of that productivity).

	I  sense that you see inheritence as bad.

> You seem to assume that none of the inequality is the result of
> differential endowments and free markets perfectly reward different
> individual productivities.  Thus, the ineqaulity that results is a
> a perfect match to different productivity.  I risk.  If I am productive
> I am rewarded.

	True.  I see no reason to penalize people because their parents were
successful.  Why should we all start from zero?  If the government is going to
tax it all away in the end, why not let the government take care of you from
the start?

> Don't you think, however, that your assumptions, as I have stated them,
> are unrealistic?  If either is true, then measured inequality is not a
> good indicator of differential efforts.

	Why should they be unrealistic?  Is it "unfair" that birds fly easier
than frogs?

...
>>        Long term poverty exists outside of welfare.  Welfare didn't cause it.
>>But welfare does not solve it, either.  So my argument is why continue with a
>>system that while it has been in place has seen an increase in the number of
>>people living below the poverty line?  That, to me, indicates a failed system.
> 
> I don't see the increase in number of people below the poverty line.  In the
> 1950s 50 percent of elderly persons were below poverty.  Now, that is less
> than 15 percent.

	The number (as a % of population) has risen steadily since the advent
of the Great Society programs.  Don't have the figures at hand, but it's in the
Business Week for this week.  (Look for the hatchet job on the 80s, it's in
there :)

> I see a system that has imperfections and needs to be fine-tuned. The
> fundamental premise (that government can set a floor below which people
> should not fall without seriously impeding the operation of a free market)
> is correct (from a pragmatic point of view).

	I don't see any problems (meaningful) with doing that either, as long
as the system does not punish people who try to climb back up from the floor. 
The current welfare system does that to people who try to find jobs (that won't
immediately make up for the lost benefits).

>>        IMO welfare does influence people to not take the economic risks that
>>might get them out of welfare by making it an all or nothing venture.  As soon
>>as they start to make money, they get dropped.  So they have to be pretty sure
>>that they will succeed in order to even attempt it.
>>        I'm not equipped to do a study, but perhaps someone has numbers from
>>the CATO institute or similar agency.
> 
> Look back at why those sorts of institutional constraints were put into
> welfare.  Conservative critics argued that people who work should not
> be getting hand-outs.  Clearly, the system needs to be fine-tuned.  We
> could benefit by looking at other systems where benefits do not depend on
> whether or not you are working.

	It's whether they are working that is the problem, it's how much they
are making.  For example, a simple negative income tax solves the floor
problem without requiring a huge bureaucracy to adminster it.  (And soak up
much needed funds.)
	You simply "refund" money to people making less than the floor.  Not a
personal favorite of mine, but much better than the current welfare system.
	In essence you would be saying "we, as a society value all work as
being worth at least $N/year".  (There are problems, of course.  Do you pay
teens this minimum?  Part-time workers?  Etc.)
	Making it a household minimum helps, and paying a % for hours worked
helps also.

>>> As you show, there is quite
>>> a bit of mobility from bottom to top in the U.S.  How can you reconcile that
>>> with your statement that our government is perpetuating poverty?  Can you
>>
>>        Total numbers.  A lot of people get out, but a lot of people drop into
>>it also.  The economic expansion was big enough to cause an overall gain, but
>>not big enough to offset the drag on the lower income groups.  Some of that is
>>cultural and not economic, though.
> 
> So now you are telling me that during the Reagan period a lot of people
> got out of poverty but even more fell into poverty?  Tell me again why
> I should think this was a good period for the U.S. economy.

	Because overall, there was a huge increase in the economy.  Like I
said, the drag on the lower end is caused by the government, and it is a
significant effect.  As Ross Perot might say "there's this giant sucking sound
coming from the lower end of the economy, where people are being dragged into
poverty by too much government". :)

>>> show me that long-term generational poverty increased after the             n
>>implementatio
>>> of the Great Society?
>>
>>        The current povert rate is higher now that it was in 1965.  Despite a
>>few trillion spent on the war on poverty.  Perhaps it's time we declared an
>>economic Vietnam and went on a new path.
> 
> That is unresponsive to my question.  I ask for numbers on generational
> poverty and you give me the static poverty rate.

	A fail to see how a percentage of the population does not answer your
question.  Indeed, that is the only valid number to use for a comparison.

>>> Will you include all the generational poverty among
>>> African-Americans and the rural poor in your pre-Great Society estimates?
>>
>>        Don't have the numbers.
> 
> Of course you don't.  So stop talking through your hat, suggesting that

	But I never made a comment for rural, or minority, or pre-Great Society
populations, just the population as a whole.
	And for talking through hats goes, you have yet to post a single
statistic.

> the current welfare system perpetuates poverty any more so than the system
> in previous eras.  Perhaps our current system is an incredibly improvement
> over the system prior to 1965.  Neither you nor I have the numbers, so
> we can't prove it.

	The rate has *increased* since 1965.  That isn't worse than before? 
Hmmm.

> You should, however, be careful.  You keep telling us how mobile the income
> distribution was in the 1980s, yet you keep arguing that "the system"
> perpetuates poverty.

	Government, not "the system".

>>> Education is clearly a difference between rich and poor in the U.S. both in
>>> level and quality.  Discrimination still plays a role, though it has been
>>> diminishing.
>>>
>>> Other than the obvious arguments about property rights...
>>>
>>> Tell me why I should value the Reagan Revolution if it did not increase
>>> income mobility, did not increase long-term growth, and did increase
>>> inequality?
>>
>>        I don't agree with any of your statements.  Did not increase mobility
>>(I'd like to see the 70s numbers on that) implies a negative affect.  Simply
>>maintaining income mobility is sufficient.  Not optimal, but sufficient.
>>        Long term growth did improve.
>>        I see no increase in inequality *except* for those who depend on the
>>government of part of their net worth.  The middle class gained on the rich
>>during the expansion.
> 
> Every measurement of inequality (Ginis, shares of income, etc.) showed
> major increases in the 1980s.  Your evidence on GDP growth is suspect.

	Why?  You have a penchant for denial but a noticeable lack of evidence
to back up your claims.

> So the accomplishment of the Reagan era was to maintain income
> mobility at the same rate as in previous times?  Damn, let's hold a
> party.

	Post your numbers before making such empty, rhetorical statements.

>>> Tell me why I should value free-market economies if they
>>> do not increase income mobility and increase long-term growth?
>>
>>        I don't think you're looking at the evidence.

	I await your figures.

Brett
===============================================================================
80s: 18 million new jobs, deficits down (%GNP), tax rates down, tax revenues up
GNP up, inflation down, unemployment down, interest rates down, cold war won
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Newsgroups: talk.politics.misc,sci.econ