Author Topic: Incomes Collapsing in the US  (Read 2314 times)

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Offline TimG

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Re: Incomes Collapsing in the US
« Reply #15 on: February 09, 2017, 01:04:17 pm »
Do you have a satisfactory confounding influence that explains the relationship? I have the feeling an army of economists would have considered that.
Ah yes - the "we can't think of anything else so our opinion must be  a fact" argument. Asserting that something is a fact requires evidence of causality backed up with repeatable experiments. Hypotheses derived from correlation studies can rarely meet that requirement but that does not stop career minded scientists from waving their arms and pretending - especially if the results are politically useful to people with money.

In this case, it makes no intuitive sense that relative changes in income would affect economic performance. It makes much more sense to say that a society that does not invest in human capital by providing reasonable access to education, healthcare and other services will experience slower growth. This in turn may CAUSE increasing inequality but inequality in itself causes nothing. It is only a symptom. You can also say that societies with rising GDPs tend to reduce inequality because growth provides resources to invest in human capital and that slower GDP growth increases inequality as people fight for a share of a smaller pie. In this case inequality is the effect - not the cause.

Another factor that is over looked in all of these analyses: the culture of different countries. Less equal countries tend to have started with a divided society and low social trust and these divisions widen over time. Equal societies tend to be homogeneous and have high social trust. This means a solution that works for high trust society like Sweden cannot be imposed on a low trust society like the US. It is simply naive to assume that increasing taxes and programs in places like the US would do anything to fix the low social trust. If anything such tactics would only make the divisions worse.

« Last Edit: February 09, 2017, 07:04:11 pm by TimG »