Emmanuel Saez, 36, a public economics expert teaching at the
His most striking finding has been to confirm the widespread intuition that income inequality has been increasing – that one of the key regularities of post-World War II economics had fallen apart. It was in 1955 that Simon Kuznets, then of the Johns Hopkins University, observed that inequality in developing countries tended to describe an “inverted-U,” rising substantially for a time as workers moved from farms into industrial cites, then steadily diminishing as output grew and gains from increased productivity were more evenly distributed.
Saez demonstrated that the “U” had decisively turned right-side up – that inequality has been rising steadily for thirty years instead of falling. Working backwards from tax data to infer household income back to 1913, when the income tax was established (modern government income surveys came into being only in 1960), he found that families making up the top ten percentile of the income distribution had been steadily increasing their share of all income since the 1970s. This best off decile of earners had one heyday in the “Roaring 1920s,” when their share reached nearly 45 percent of national income. There they remained until about 1940, when norms associated with the conduct of World War II apparently knocked them down to around 33 percent of the total. Their share remained remarkably stable for the next three decades, at around a third of national income, until the mid-1970s. Then the top decile’s share began to climb again, hitting 49.7 of national income in 2006, higher than any year since 1917 and surpassing its level in 1928, Saez found. It took $104,700 in market income for a family to make the top 10 percent in 2006.
Moreover, most of that improvement owed to record gains for families in the top one percent of income (earning more than $382,600). It was the very rich whose fortunes seemed to have been at the center of the story of income distribution, Saez wrote in Striking It Richer in the Stanford Center for the Study of Poverty and Inequality’s Pathways Magazine – from nearly a quarter of the whole in the late 1920s, to less than 10 percent in the 1960s and 1970s, before climbing back to nearly a quarter by 2006.
(Matt Yglesias has a picture of this.)
Saez, a French citizen, was born in 1972, meaning that he is only slightly older than “the tax revolt,” a phenomenon which, in the
The American Economic Association citation accompanying the award stated, “Unlike many others who work in this area, Saez straddles the great divide between theory and empirics and brings the two noticeably closer together. His work usefully illuminates questions concerning issues such as the appropriate marginal tax rate for high income taxpayers, the structure of income transfer programs, the treatment of capital income, and the taxation of married couples.”
For all the emotional impact of the tax debate, however, there are clearly additional reasons for the increase in inequality of the past thirty years. They include technological advances, increasing globalization, changing theories of compensation and altered public expectations of economic growth. It will be a long while before any of it is pinned down. But Emmanuel Saez and others of his ilk have dramatically raised the level of the debate from the days when the price of entry was no higher than a curve sketched quickly on a cocktail napkin and insistently reproduced in newsprint.
The annual meeting of the Royal Economic Society is an ad
vantageous window through which to view recent developments in mainstream economics. The preponderance of these developments unfold in North America, so the program committee flies a handful of lecturers across the
Last week at the
The organizers also select fifty or so paper to showcase, from among the more than 100 that are contributed, mostly by up-and-comers in European and British universities. And all the while they maintain a running commentary among themselves about how best to use the
So it was good news that an International Benchmarking Review last autumn deemed the nation’s economics research faculties to be in robust good health, “more prominent” than those of any other country except the
Not so in
Not that Israel’s universities aren’t turning out plenty of economics majors; there are more than ever before. But while they know plenty of theory, they often fail to understand its connection to the world around them. And while the best of them have long gone to the
What’s the solution? A recognition, the committee urged, that Israeli economics must embrace the hiring and promotion practices of departments in Western Europe and the United States, and that more money is needed at every level.
The American newspaper industry has fallen on hard times, and its authority has dimmed, at least for the moment. But the conservators of its traditions quietly took an admirable stand last week. The Pulitzer Prize Board passe
d over The New York Times columnist (and
Krugman is an economist of considerable distinction. He deserves the Nobel Prize for his work elucidating the mechanisms of international high-tech trade (though the
Besides, in a year when Krugman energetically supported the presidential candidacy of Hillary Rodham Clinton, it was Robinson who got the story.