The Golden Mean
BROCKWAY, GEORGE P.
The Dismal Science THE GOLDEN MEAN BY GEORGE P. BROCKWAY The Census Bureau has finally released its estimates of the 1986 median family income, the numbers of people living in poverty, and...
...My guess is that figures for the same years showing how many families had incomes over, say $500,000 (in constant dollars) and under $10,000 would give a better idea of our increasingly polarized income distribution...
...In an impressive array of societies, Pareto estimated as best he could, given the practical nonexistence of reliable data, the arithmetical mean of incomes...
...they are at best indifferent, at worst hostile...
...In the present instance, maldistribution of talent or effort has been proposed as the explanation for the maldistribution of economic rewards: If you're so smart, how come you're not rich...
...The Census Bureau figures show that we are going in the opposite direction, and they are ominous from the point of view of our society as well as from that of our economy...
...The Dismal Science THE GOLDEN MEAN BY GEORGE P. BROCKWAY The Census Bureau has finally released its estimates of the 1986 median family income, the numbers of people living in poverty, and I he distribution of income among the rich, the poor and the middle class...
...It demeans itself...
...Nevertheless, his alleged law provides alleged justification for the trickle-down theory of political economy...
...it's just a case of great minds running in the same channel...
...II is bad enough that from 1970 to 1986, as the Census Bureau reports it, the richest fifth of American families increased its share of the national income from 43.3 per cent to 46.1 per cent, while the poorest fifth saw its share decline from 4.1 per cent to 3.8 per cent, and the share of the middle threefifths dropped from 52.7 per cent to 50.2 per cent...
...On the other hand, the very poor...
...Lars Osberg has written a solid 300-page book on the subject, Economic Inequality in the United States, that is a good place to begin i f you want to understand the complications...
...We are faced with something more than an aberration of American politics...
...Yet the two kinds, though they are not congruent, do very much converge...
...Surprisingly, it remained for Rousseau to give the argument a subtle shift: " It is on the middle class alone that the whole force of the laws is exerted...
...What can happen here—what is happening here—is not alienation in the sense of allegiance to a foreign power, but alienation in the sense of no allegiance whatever...
...The upper class feels itself exclusive, the lower class excluded...
...Actually, he allowed that change did occur on the low side of the mean...
...These figures are a long way from fully disclosing the range of incomes, but they do suggest fertile fields for alienation at both extremes...
...are neither willing nor able to submit to authority...
...What happened on the low side of the mean didn't interest him, though...
...Indeed, it becomes steadily clearer that a more egalitarian distribution of income would produce greater prosperity...
...It depended on the facts he so laboriously collected and was inevitably at the mercy of contradictory facts, such as those just released by the Census Bureau...
...A typical statement of one side of the debate is Pareto's Law, promulgated by Vilfredo Pareto in 1896, and not to be confused with his fashionable but fuzzy notion that goes by the clumsy name of Pareto Optimality...
...This has never been good psychology...
...And not only Reagan's mind, but Margaret Thatcher's and Jacques Chirac's and Helmut Kohl's, and Yasuhiro Nakasone's, and those of most of the leaders of theThird World and of most of the people running the IMF, not to mention every investment banker you ever heard declaiming about the bankruptcy of Social Security...
...The average income of those above the middle 60 per cent is $ 126,415, that of those below is $10,142 (or lower than the official poverty level of $11,203...
...He hoped there would be a lot of movement up and down, in the expectation that this would permit Darwinian laws (which he obviously misunderstood) to improve the species...
...Rather, it is the Bureau'saeknowledging for the first time that "there has been an increase in inequality in the United States during the last decade and a half"—or from Richard M. Nixon through Ronald Reagan...
...The middle class feels the force of the laws because it has a stake in the laws— in things as they are, or at least in the direction things are taking...
...These means did not come in the center, as they would have if the distribution followed a standard bell curve...
...The conscious aim has been to make the rich richer on the Paretan theory that the rest of the economy will be dragged upward, too...
...There is also a less pressing reason for a more egalitarian distribution...
...are too degraded...
...The economy springs ahead, we are told, because certain people are good at getting things done, and these people need financial incentives...
...On the other hand, you have to use either a carrot or a stick to get most people to do the humdrum jobs and the unpleasant jobs—that is to say, most of the jobs...
...Experience suggests," Keynes said, "that in existing conditions saving by institutions and through sinking funds is more than adequate, and that measures for the redistribution of incomes in a way likely to raise the propensity to consume may prove positively favorable to the growth of capital...
...Keynes wrote a great book to elucidate it...
...They get their kicks from doing, not from accumulating, and the problem is to calm them down, not stir them up...
...But the sole evidence for the distribution of talent or effort is the distribution of rewards...
...I hasten to protest that I'm not suggesting the President ever heard of Pareto, let alone read him...
...So I'll take what the Census Bureau says on trust (or distrust) and simply note that its figures assume the rich, the middle and the poor are fixed percentages of the population, instead of classes with definable characteristics to which variable numbers of people belong...
...These observations are obvious enough...
...Moreover, it is likely that many of the 38.2 million families so classified might more accurately be grouped among the working poor...
...consequently, what the Census Bureau sees happening to what it calls the middle class (the middle 60 per cent of the population) is worth attending to...
...Empirical observations areelevated to the status of laws only if reasoned explanations can be adduced for them...
...Pareto's supposed law is frequently misrepresented to assert that no change is possible in income distribution...
...Since super-rich individuals and infra-poor individuals can be law abiding, social class as understood by Rousseau and me is not quite the same as economic class...
...Thus arises a polis, not of freemen, but of masters and slaves...
...On the one hand, the real can-do guys, like a Marine lieutenant colonel we have recently heard of, are must-do guys...
...On this basis we always have the three groups with us, and in the same proportions...
...Efforts at redistribution, in his view, were doomed lo failure and could only make it worse for everyone...
...Unlike more naïve knee-jerk conservatives, Pareto did noi claim that the same people would invariably be on the high side...
...To allege that President Reagan has consciously aimed at the erosion of the middle class would be easy, but it would be wrong...
...Even if the Democrats manage to avoid self-destruction, and even if they manage to awake, like Rip Van Winkle, from their 20-years dream of middleof-the-roadism, they will still have to struggle to protect our society from the conservative crazies of the rest of the world...
...It was, after all, obvious that fewer people starved to death in 19th-century Europe than had done so previously...
...A prosperous economy depends on the society's propensity to consume, and the propensity to consume depends on the ability to consume, which depends on the ability to pay the bills...
...It is by no means easy to know how to go about measuring inequality...
...If there is no natural law of income distribution, then human policies can have an impact, and it is no longer rational to argue that prosperity depends on making the rich richer...
...the laws are equally powerless against the treasures of the rich and the penury of the poor.' In any stable society the middle class is, for all practical purposes, the society...
...For regardless of what we do at home, these crazies will continue to enrich their rich, who will continue to want to speculate on our markets, which will again suck up and ultimately destroy whatever surpluses we create...
...The issue, however, is usually posed in terms of psychological incentives...
...Putting to one side the probability that i f you want to understand how the economy distributes its benefits wealth is a better index than income, I suggest that the customary method of presenting the statistics understates the shocking and dysfunctional economic inequality in the United States...
...Any economy or any company that beats its people with sticks is to that extent inhumane...
...For my part, I share Disraeli's view that there are "lies, damned lies, and statistics...
...The news is not the figures: They merely confimi the impression everyone has had...
...The argument chases its tail...
...The American middle class is slipping economically...
...Wealth," Plato wrote in The Republic, "is the parent of luxury and indolence, and poverty of meanness and viciousness, and both of discontent.' Aristotle saw that "those who have too much of the goods of fortune...
...Carrots are obviously more humane than sticks (I like carrots...
...He was fascinated by the consistent pattern he claimed to see on the high side and by the conclusion he drew from it, namely that progress for the lower orders depended on progress lor the top...
...That shifts in distribution are occurring at all has a bearing on a long-running debate in economic theory...
...Pareto himself recognized, at least in principle, that his law was only empirical...
...Furthermore, the curve on the high side of a mean was radically different from that on the low side, because there was no top limit to possible income, but everyone below a bottom limit died of starvation, reducing the curve to a straight line at that point...
Vol. 70 • November 1987 • No. 16
