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Sunday, October 20, 2002

Paul Krugman Delivers A Left Dream Sequence

Writing for the NY Times magazine, Krugman delivers the intellectual equivalent of a gift-wrapped box of chocolates. All for the benefit of his left-wing readers, of course. Phrases such as "conservative commentator" appear only prior to a phony argument that manipulates and distorts the data.

It's a long article, and presents many opportunities for criticism. I'll throw out a few here.

Statistical assertion that won't withstand scrutiny: "Mansions have made a comeback... Needless to say, the armies of servants are back, too."

Armies of servants? I have vague memories of reading that Vanderbult had sixty to one hundred servants just at his summer estate. Does Bill Gates have anything like that?

Carville quality spin: "We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II."

Oh, good old FDR and his many plans. Of course, some people might attribute the change in the concentration of income to the Great Depression, but that just sounds so unpleasant, and, well, depressing. We don't really want that again, do we? Actually, avoiding World War might be a good idea, too. But the New Deal, hey, we liked it!

Non-rebuttal of plausible argument: Krugman mentions three possible causes of rising inequality: globalization, "''skill-biased technological change", and the "superstar" theory - more jobs, and businesses, resemble "winner-take-all" competitions. The rebuttal of the third theory?

"The superstar theory works for Jay Leno, but not for the thousands of people who have become awesomely rich without going on TV."

Oh, my. So much for superstar bankers, or lawyers, or economists, or software gurus, or anything beyond TV.

Most dangerous approach to "He must be kidding?!": A tie.

"John Kenneth Galbraith described the honest executive of 1967 as being one who ''eschews the lovely, available and even naked woman by whom he is intimately surrounded.'' By the end of the 1990's, the executive motto might as well have been ''If it feels good, do it.''

Please. We know what we are thinking. Second entry:

"Economists also did their bit to legitimize previously unthinkable levels of executive pay. During the 1980's and 1990's a torrent of academic papers -- popularized in business magazines and incorporated into consultants' recommendations -- argued that Gordon Gekko was right: greed is good; ...

It's hard to escape the suspicion that these new intellectual justifications for soaring executive pay were as much effect as cause. I'm not suggesting that management theorists and economists were personally corrupt. It would have been a subtle, unconscious process: the ideas that were taken up by business schools, that led to nice speaking and consulting fees, tended to be the ones that ratified an existing trend, and thereby gave it legitimacy."

As I suggested, is "Mr. Enron Consulting Fees for I Know Not What" kidding? An unconscious cry for help?

Now, a very broad criticism of interest only to folks who have made it through the article: Krugman deplores the rising income inequality in America, and wonders why we can't stay on the same path as the 50's through the 70's. It is clear, although not emphasized, that this period was anomalous. Why might that be the case? Well, US industry had not been devasted by WWII. Unskilled and union labor in this country had no significant foreign competition. Probably a good time to be a US worker. Left unmentioned is that, by the late 70's, the US economy was a disaster. The recent talk about Jimmy Carter may have reminded a few folks. But I remember, for example, that all through the 70's, Detroit refused to focus on improving the quality of their rolling rubbish, preferring instead to grovel for import quotas on Japanese cars. Is that the situation to which we should turn back the clock?

Secondly, Krugman bases a large part of his argument on the unraveling of a social compact in which executives restrained their pay back in the anomalous "Golden Era". Well, yes. Executives restrained their pay in exchange for lifetime employment, generous, unscrutinized, untaxed expense accounts, generous perks, and light hours. Remember the infamous "three-martini lunch" of the Carter era? Do you still hear about it?

And beyond that, this era of conformity in executive pay was also an era of conformity in political thought, which, at its extreme, lead to McCarthy. It was also an era of conformity in notions of professional capability: woman and blacks need not apply. Krugman does not wonder whether these forces are linked. Can we eliminate the white male country club of 1950's style corporate management, but preserve those notions of lifetime employment and stable, modestly rising compensation?

Krugman focusses entirely on higher executive pay with no mention of the other changes in executive lifestyle or expectations that have occurred since the 80's. Sort of the sound of one hand clapping. The left hand.

UPDATE: Well, well. Google. Why not? Here is stuff on the Vanderbilt Mansion, and the Vanderbilts themselves.

UPDATE 2: Yes, some of this material does seem a bit familiar. Here is a Brad DeLong piece to which we linked on June 16, suggesting it is not all darkness. And Andrew Sullivan comments on Krugman's article.

UPDATE 3: A new entrant for "Most absurd argument"? Why not? Let's go to the text:

"modern American politics is bitterly polarized. But wasn't it always thus? No, it wasn't. From World War II until the 1970's -- the same era during which income inequality was historically low -- political partisanship was much more muted than it is today.... My Princeton political science colleagues Nolan McCarty and Howard Rosenthal... have done a statistical analysis showing that the voting behavior of a congressman is much better predicted by his party affiliation today than it was 25 years ago. In fact, the division between the parties is sharper now than it has been since the 1920's.

What are the parties divided about? The answer is simple: economics... the growing inequality of our incomes probably lies behind the growing divisiveness of our politics."

Whoa. Other possible explanations of the unsurprising statistical result predicting Congressional votes: the massive realignment of Southern Democrats, who voted with Republican on many issues relating to crime, national defense, labor law, and taxes. Many of those DINOs are now formally Republicans. Similarly, where are the "Rockefeller Republicans" of yesteryear? Some, like Jeffords, have gone independent; some, like Chafee, think about it; and many have just been voted away. Please tell me that this is not news to Krugman or the professors he cites - I haven't read their work, but I am sure they address this.

As to other factors that may have contributed to a certain partisanship, one might mention the end of the Cold War. During the Cold War, a facade of national unity was important - man, am I actually writing this? I can't go on - this is so obvious a point that I can only assume Krugman is trolling us. Which also saves me mentioning Watergate, the Chicago police riots of 1968, the Viet-Nam War, the Civil Rights movement, and other profoundly bipartisan activities of the 60's and 70's.

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