He and Kevin Edrmann have a post that sets itself the task of explaining rising inequality.
http://www.nationalreview.com/article/419442/heres-whats-driving-inequality-scott-sumner-kevin-erdmann
Now typically, discussing inequality with can seem like whack-a-mole as as you knock down one conservative rebuttal they come up with another that often contradicts their previous dismissals of question of inequality. It seems to me that the 2 most common response that conservatives come up when liberals raise this question is:
1. Deny that it's really happening. I look at this as kind of the Judge Judy defense-you know she warns against 'Peeing down my leg and telling me it's raining' and this is kind of how I look at claims that there is no problem.
2. Say that it doesn't matter even if inequality is rising as that's the price of efficiency in a capitalist economy. If you are one of those who has to pay the price of this efficiency on the distributional level, well, it sucks to be you.
To recap: Argument 1 is the Judge Judy argument and number 2 is the Sucks to be You! argument.
No, that's not what conservatives literally say, but that's what it amounts to. Some are going to have to suffer distributional losses-oh well. To try to alleviate this will cost us efficiency. We'll shrink the pie and even our attempts at fairer distribution will usually do more harm than good.
I've definitely seen Sumner in the past make some version of the Judge Judy argument though not very much the Sucks to Be You! argument.
In the piece he writes for National Review with Erdmann he doesn't use Judge Judy at all. He fully accepts that inequality is getting worse. If you're a liberal trying to debate him this is some progress-at least we don't have to waste time arguing whether or not there even is rising inequality. Again, I can recall Sumner going Judge Judy in the past-he's claimd that liberals don't know what they are talking about when they bring up flat median income over the last 30 years-presumably, if you follow these arguments, there is very little going on assuming you use a better gauge-per capita income and keep in mind Life Cycle Effects.
However, this may be, he concedes the basic argument here. We do have rising inequality and it is a problem-he never has used the Sucks to be You! argument much as far as I'm aware and I think it's fair to say I've read quite a few of his posts-though certainly not all of them. Still, I don't remember him every using Sucks to be You!
So inequality is rising but what''s the cause of it? Even before reading it I think it's fair to say we have a good idea of what he will say it causing it; or at least what isn't causing it.
We know it won't be due to market failure but rather government failure. Here Sumner is in a comment he made to me in a question of what he thinks is causing the Great Stagnation-assuming for the sake of argument there is any such thing.
“Can anything be done policy wise about productivity or is policy pretty much powerless?”
http://www.nationalreview.com/article/419442/heres-whats-driving-inequality-scott-sumner-kevin-erdmann
Now typically, discussing inequality with can seem like whack-a-mole as as you knock down one conservative rebuttal they come up with another that often contradicts their previous dismissals of question of inequality. It seems to me that the 2 most common response that conservatives come up when liberals raise this question is:
1. Deny that it's really happening. I look at this as kind of the Judge Judy defense-you know she warns against 'Peeing down my leg and telling me it's raining' and this is kind of how I look at claims that there is no problem.
2. Say that it doesn't matter even if inequality is rising as that's the price of efficiency in a capitalist economy. If you are one of those who has to pay the price of this efficiency on the distributional level, well, it sucks to be you.
To recap: Argument 1 is the Judge Judy argument and number 2 is the Sucks to be You! argument.
No, that's not what conservatives literally say, but that's what it amounts to. Some are going to have to suffer distributional losses-oh well. To try to alleviate this will cost us efficiency. We'll shrink the pie and even our attempts at fairer distribution will usually do more harm than good.
I've definitely seen Sumner in the past make some version of the Judge Judy argument though not very much the Sucks to Be You! argument.
In the piece he writes for National Review with Erdmann he doesn't use Judge Judy at all. He fully accepts that inequality is getting worse. If you're a liberal trying to debate him this is some progress-at least we don't have to waste time arguing whether or not there even is rising inequality. Again, I can recall Sumner going Judge Judy in the past-he's claimd that liberals don't know what they are talking about when they bring up flat median income over the last 30 years-presumably, if you follow these arguments, there is very little going on assuming you use a better gauge-per capita income and keep in mind Life Cycle Effects.
However, this may be, he concedes the basic argument here. We do have rising inequality and it is a problem-he never has used the Sucks to be You! argument much as far as I'm aware and I think it's fair to say I've read quite a few of his posts-though certainly not all of them. Still, I don't remember him every using Sucks to be You!
So inequality is rising but what''s the cause of it? Even before reading it I think it's fair to say we have a good idea of what he will say it causing it; or at least what isn't causing it.
We know it won't be due to market failure but rather government failure. Here Sumner is in a comment he made to me in a question of what he thinks is causing the Great Stagnation-assuming for the sake of argument there is any such thing.
“Can anything be done policy wise about productivity or is policy pretty much powerless?”
"Yes,
stop electing politicians who favor more government spending,
regulation, taxes, wars on drugs, NSA spending, etc. Small government
capitalism promotes productivity. Libertarianism"
http://diaryofarepublicanhater.blogspot.com/2015/06/noah-smith-get-out-of-scott-sumners-head.html#comment-form
With that in mind, we at least have an idea of the direction in which Sumner is going to go. This is why I believe there is at least some truth in what Noah Smith said-see the above link. There is a certain ideology that academic economists have that what they do is a pure science without any kind of ideological concerns putting a thumb on the scales, but this is not really plausible.
This doesn't mean that I think that all economics is about are a collection of stalking horses, but I do think that's one of the things they are used for. After all, why would economics be of any interest at all without it's possible implications for policy? I guess some academics might enjoy a kind of 'Pure Economics' like 'Pure Mathematics' but this would be a tiny academic minority.
Don''t get me wrong, I believe that to critique Sumner's argument hear properly, you should read it with an open mind-but it helps to know his priors and he's not shy about those. We know that he's going to see inequality as a problem emanating from the government and being solved via libertarian means.
Indeed, that's what he does in the NR post. He argues that the chief cause of rising inequality is rising regulations. To a liberal this may seem strange as you can argue we were a much more regulated economy in the 50s, 60, and 70s than today-the entire airlines and trucking industry were government run.
However' it's not surprising to hear this from Sumner is you know him and his priors.
He sees rising IE as caused by a growing 'complexity of regulation', regulations that are barriers from home building, and subsidies for homeowners-the mortgage deduction, etc.
Not everything that he and Erdmann-who seems to have had a moderating tone on Sumner who goes the entire piece without any snarky name calling whatsoever; interesting as he's supposedly the professional economist, Erdmann the layman-suggest do I disagree with. It definitely seems to me that patent protection has gone way too far. There may be something to the issue of regulations harming renters-this is a point that is something of a pet peeve of Yglesias.
I do agree that at least one factor that at least exacerbates IE is the growing advantages of homeowners vs. renters. Overall, though, I don''t agree that what's causing IE is predominantly, too much regulation.
Sumner explains to us how a capitalist economy is supposed to work. It should have natural mechanisms to limit inequality
"If housing is very expensive in coastal California, firms should build more houses. If Mickey Mouse toys and Barbie dolls are profitable, more firms should produce those toys. If some professions make more than others, people should move into those higher paying professions."
In his mind the only reason this doesn't happen is through unwise government regulation. I think this touches on one of the reasons that in the blogosphere, academic economists and laypeople who read the blogs so often can't seem to understand each other.
http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/07/can-you-please-read-a-first-year-textbook.html
I think that when a layman reads Sumner say 'This is how a capitalist economy is supposed to work' they react by saying 'Who says it's supposed to work this way. Is there any proof that it does in tfact work this way?'
But when Sumner says this is how the market works it's not first and foremost an empirical statement but a theoretical one. This is the model of the economy he believes in.
The majority of mainstream Neoclassical economists believe in something along those lines-whether conservative or liberal-though, Sumner is sort of an outlier. The version of the market economy he enunciates here is orthodox Coase's Theory of the Firm; the market behaves in a very optimal way. Many-probably most-NC economists believe in more market imperfections than this.
When you think about it, almost all American law regarding the market and industry since Teddy Roosevelt implicitly doesn't believe that market economies work this seamlessly. For instance, Sumner implicitly seems to deny that monopoly can be a problem outside of too much regulation-which in the radical libertarian position 'too much' means any more or less.
Anti-trust law is the presumption that industries sometimes will create unhealthy and inefficient monopolies. To an extent such laws stand 'athwart'-good word to use as Sumner is writing in William F. Buckley's magazine-mainstream NC economics even today-though, again, today, most non-libertarian economists today certainly wouldn't claim there should be no Sherman Act-a sizable amount agree with Dodd-Frank.
P.S. The anti-trust law always had a special kind of legitimate monopoly-'natural monopolies'-and the actual 19th century story of the trusts-the railroads, steel, etc.-is that the problem wasn't always too little competition either-sometimes customers were hurt with too much competition.
P.S.S. I think this distinction between theory and evidence is key to understanding why so often laypeople and academic economists don't have any kind of meeting of the minds. What the layman doesn't understand is that economists in some sense are part of their own secret society with different codes of conduct and rules of etiquette than larger society.
When economists talk about 'What standard economics says should happen' this is a discussion about theory not empirical proof or data. I think laypeople reason mostly via empirical data.
Now why, economists put such a high premium on theory vs. data-like in Friedman's classic Positive Economics is another question altogether.
http://www.amazon.com/Essays-Positive-Economics-Phoenix-Books/dp/0226264033
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