Inequality Without Class

[marmar]

Inequality Without Class
To grasp where inequality is headed—much less to reduce it—we will need to look beyond the economic.

Simon Torracinta ▪ Spring 2024


(Dissent) An academic journal article on the technicalities of tax data is not usually cause for much excitement. Yet at the end of last year, one such publication in the Journal of Political Economy set #EconTwitter afire with debate, and prompted a full column in the Economist. The paper, by Gerald Auten and David Splinter, took aim at the famous studies on rising inequality conducted by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman. If one employs different assumptions, Auten and Splinter argued, post-tax income inequality in the United States appears not to have risen much since the 1960s. While Piketty and his collaborators systematically challenged the findings, their detractors were quick to the draw. “The Piketty and Saez work is careless and politically motivated,” sniped James Heckman, a Nobel-winning Chicago School econometrician.

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The economist Branko Milanovic made his own major contribution to the study of inequality in 2016 with his breakout Global Inequality. His foremost finding was the “elephant curve”—a graph of income trends worldwide since 1988 that showed significant gains for the “emerging global middle class” as well as the rich, while incomes for the very poorest and the “lower middle class of the rich world” had stagnated. In a decade that saw one populist uprising after another among those left behind by globalization, the chart achieved totemic status.

In his latest book, Visions of Inequality, Milanovic steps back to question the study of inequality itself. Where does this work come from? Was inequality always so central a preoccupation for economists—or in politics at large? Ultimately, the book reveals the limits of a purely economic framing of these questions.

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In the capitalist world, Milanovic argues, trends in income distribution made economists complacent about decreasing inequality, while ideological confrontation militated against emphasis on the significance of class in the West. Additionally, the neoclassical paradigm centered on analysis of equilibrium conditions between diverse economic agents whose unequal “endowments”—of capital, resources, skills—were simply taken as given; discussion of that original divergence was a priori out of scope. As Milanovic dismissively concludes, neoclassical models of distribution related “to life on Earth about as much as the theories that astrobiologists have developed about life on Mars.” This retreat from inequality was equally visible in macroeconomics: while the classical political economists were convinced that returns to labor and capital changed over time, from the 1960s economists swept away such claims altogether with the largely arbitrary assumption that “factor shares” did not change over the long run—which implied a mostly static income distribution. Even in development economics, where attention to differing wage levels came with the territory, the Kuznets hypothesis instilled the basic idea that growth would take care of inequality. ...................(more)

https://www.dissentmagazine.org/article/inequality-without-class/