Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Thursday, September 07, 2006

Fire David Brooks. Fire David Brooks Today (Why Oh Why Can't We Have a Better Press Corps?)

The New York Times wouldn't hire an op-ed writer who was this illiterate. Why does it employ David Brooks, who appears to be innumerate?

Jared Bernstein reports. You decide:

MaxSpeak, You Listen!: DAVID BROOKS RUINED MY SUBWAY RIDE
By Jared Bernstein
: His oped in the NYT this A.M. ($$) is way too dismissive of a number of factors that inequality analysts widely agree play a role in the long-term problem of unequal economic outcomes.

As is too often the case, journalists who can't find a factor that explains 51% of the phenomenon in question dismiss everything. Brooks argues that declining unionization is not a "driving force" because it only explains 10-20 percent of the rise in inequality. But that's as big as any other force that economists have measured. Roughly speaking, the decline in the real value of the minimum wage explains about that much (more for female wage inequality). And globalization is generally cited as accounting for around this share of the increase as well....

Does Brooks or anyone else seriously believe that the increase in trade, investment flows and multinational corporate activity has had no impact on inequality? Does he believe that large and sustained trade deficits have nothing to do with the loss of manufacturing jobs and the fall in the relative wages of non-college educated workers?

At this point, I'm not aware of any serious analysis of inequality that is anywhere near this dismissive of these impacts. Granted, they are discussed in terms of transitional costs, but they are widely recognized as part of the problem. Fed Chairman Bernanke, for example, worries about these issues.

Offshoring in Brooks's piece is another mythic force.... But... Brooks ought to be aware that the literature on the impact of offshoring has appropriately shifted its focus from job loss to wage loss. You don't have to lose your job to be affected by competition from the fact of millions of skilled workers coming online in the global economy. Alan Blinder famously makes this case in a recent Foreign Affairs piece ($$).

Next, Brooks claims that workers are just as secure as they were in decades past and that social mobility is unchanged. But even he would agree that there's more inequality now than there used to be, and unless mobility has increased, we are much further from each other across the economic spectrum, and no more likely to span the increased distances. We need more social mobility to offset rising inequality, and we haven't gotten it....

Brooks is also in denial about "factor shares." Again, no serious analyst questions whether profit rates or shares are uncharacteristically high right now though again, many argue this is soon to be corrected. Brooks notes that the compensation share of GDP is relatively unchanged (the wage share of national income is near historic lows), but this includes CEO pay, bonuses, stock options, and so on. Again, inequality analysts recognize that big, inequality-inducing shifts have occurred within the compensation share of national income.

Finally, those who want to dismiss the impact of everything except skills have to explain what happened in the 1990s. Measures of inequality--especially those that emphasize the gap between the middle and bottom--compressed over those years. The 20th percentile real wage rose in step with productivity, and poverty fell sharply, especially among the least advantaged. That hadn't happened since the latter 1970s and it hasn't happened since. Did skills temporarily rain down on people's heads, 1995-2000, and then disappear?

Obviously, other forces are at play.... To dismiss everything except skills is to misdiagnose the problem, inevitably leading to insufficient solutions.

If the New York Times editorial page operation wants to survive, it needs to establish one benchmark principle: people aren't allowed to write about things they don't understand.

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