Wednesday, April 2, 2008

Dispelling Myths

Dani Rodrik:

Look at the figure below, and then look at it again, and again, and again. It is the most telling picture about the U.S. political economy I have ever seen.

I pretty much concur wholeheartedly. Click the link to see for yourself.


Russ said...

Wow, that's a lot of information from one graph with no data to support it. I guess you'll have to read the book. The author states that it is not economic cycle driven, but where is the data? Also, what did the employment rates do during those periods? What is inflation doing during those times. Plus, as he had to do a lot of averaging to get that graph, was there a year where there was a huge swing which skewed the data? What do they say about statistics? "Lies, darned lies, and statistics", or something like that. Maybe it means if you want your income to go up, vote republican!

Dennis said...


I think you're probably reading the graph incorrectly. What it shows is that under a Democratic president, income at every level has a higher percentage increase than under a Republican president.

It also shows that under a Republican president, increases in income are highly unequal, with the biggest increases going to be people with the most money (and since that's measured as a percentage, and not an absolute number, one cannot say that this is explained by rich people having more money).

The opposite is true, though to a lesser extent, under a Democratic president - the people with the biggest increases are those who need it most (i.e. those at the bottom).

If this is a book written by a Princeton political scientist, you can bet it's been vetted six ways from Sunday - and will be shredded by economist and political scientists alike if it's wrong. And with 50 years of averaging, one off year is not statistically significant.

Nice try, though.

Russ said...

yep, I read it backword. I still stand by my discussion of statistics. It will be interesting to read the book. I'd like to know what specific policies of Democrats raise the levels and what policies of the Republicans specifically lower the values. Or, stated another way, are the Repubs doing something to keep all the levels from going up? It is easier to see why the rich would do a bit worse than the less wealthy under Dem policies. I don't think the rich are stupid, so if this chart was true, all the rich would rapidly become democrats.

50 years of statistics misses the depression and the early 30's so they could be significant, I just don't know. Carter was pres during some seriously bad times, so I doubt the same happened during that time period. Clinton was pres during an unsustainable bubble that would inflate the numbers the other way.

I am not really trying to argue against the idea of the graph, just doubtful of one single picture.

Dennis said...

"I don't think the rich are stupid, so if this chart was true, all the rich would rapidly become democrats."

That's why I titled the post "dispelling myths."

There's a pretty big jump in logic there, Russ: You assume all rich people are a) smart and b) well-informed.

Certainly neither is true, and certainly there are millions of people who believe things that are, in fact, false.

Besides, plenty of folks with money are also short-sighted, and this is definitely a long-term thing.

Russ said...

Very true.

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States License.