Get ready for a big surprise

Conventional wisdom tells us that: (1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period; (3) low-wage burger-flippers have replaced high-paid factory jobs; (4) only the top one percent or ten percent have benefited significantly from rising productivity or asset prices; and (5) the once-robust middle class has been shrinking. 

Just about everybody treats those assertions as if they are facts.  That includes politicians on both sides, talking-head partisans, economics correspondents, and columnists—many with undisguised or thinly-veiled political agendas.  They are supposed to be the experts, and the masses (like me) have to trust them; after all, our busy lives permit us only a limited amount of time for paying attention to politicians and the press.  When the experts are nearly unanimous, that’s a good signal that the five conventional wisdom assertions have to be true . . . isn’t it? 

That brings us to the big surprise, which Alan Reynolds sums up clearly and concisely: “Not one of those statements is even remotely close to being true.”   

This book (Income and Wealth, by Alan Reynolds) is one of the best debunkings of conventional wisdom I’ve come across in a decade.  It is a step-by-step dismantling of conventional wisdom about income and wealth distribution.  Alan Reynolds does it methodically, one point at a time—using direct quotes from people who make those assertions, clear logic explaining what’s wrong or misleading about those assertions, and facts and figures from easily-checkable references to official, government-published sources (such as the Statistical Abstract of the United States, the Bureau of Economic Analysis, and the Bureau of Labor Statistics). 

Why, then, do so many people seem to accept the false conventional wisdom without question?  I have a guess: Each of us likes to think the person we heard it from must have done their homework; otherwise they wouldn’t be talking like that.  Let’s face it, assumptions like that save us a lot of work.  In this case, however, I now realize that, by trusting conventional wisdom, I was being too lazy—and I strongly suspect that most of our country’s so-called “economics correspondents” are guilty of the same thing I was. 

I am thankful that Alan Reynolds is one who actually did the homework on this subject, then wrote a book laying out his findings.  His attitude is one we should all adopt: “I accept nothing as an article of faith.  I want to hear the logic and see the evidence.  And you should demand nothing less.  In the absence of logic and evidence, you should not give a hoot about my opinion.  Reality is not a matter of opinion.” 

And I’ll steal one more passage from his book:

“No matter what one thinks ought to be done about taxes, spending, unions, immigration, minimum wage laws, and so on, the first thing that needs to be done is to get the facts right.  If that happens, there will still be plenty of room for lively debates about all sorts of public policies.  And they will be honest debates.”

This book will always be within an arm’s reach of my workstation.  I highly recommend it, especially to anyone thinking about writing on the subject of income or wealth “distribution” in the United States of America. 

Get this book, and get ready for a big surprise. 

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End note: This is the book review I promised a while back.  I also posted it to Amazon.com, and so far, Alan's new book is averaging five stars. 

Comments

[Stephen Reed]

It looks like a good book, but the price seems pretty steep. Why did they decide on $55 when other books covering economic topics tend to be in the $20 range? I think I'll wait either for a used copy or see if I can pick it up at the library.

[John in IL]

"so far, Alan's new book is averaging five stars"

Steve,
In addition to the other great info you provide, you make me laugh. Thanks!

[Bret]

I wonder if it'll come out in paperback one day. $55 is pretty steep for pleasure reading. Maybe I'll splurge and cough up the dough eventually.

BTW, now that the Dems are in power, I suspect we'll hear that everything is much better now. If we get a Dem president in 2008, we'll hear how the economy has never been better. It's amazing what a little change in perspective can do!

[Robert]

Is it irony when an economics book is priced so high that the majority of consumers will not buy it?

[Bob]

Couple of comments:

The mainstream media is prone to sensationalism because 1)they're lazy 2) they're mostly journalists who have no real subject matter knowledge and 3) we live in a 10 second sound bite world.

We are going through a transition. One that is causing significant change. It really doesn't matter what is causing the change it is that change is an emotional matter. Therefore, it should come as no surprise that there is all this, well, emotion.

When the largest company (by revenue) is a retailer with predominately low wage employment that is a stark contrast to the large companies of the "old" economy (if there really is such a thing). Facts are facts but when GM gets replaced by WalMart it's bound to cause anxiety. Why would it not? I won't argue that the current business model of GM is flawed (it most certainly is )but the point is that this change is significant.

I suppose it always comes back to the glass half empty of full but let's just say that this country enjoyed a relatively period of global market insulation and stability in employment. While the changes are irreversible it should come as no surprise that people are a tad testy nowadays.

[AlanReynolds]

Sorry about the high price, but the book is full of graphs and tables which always results in a high price. Income and Wealth is marketed as a college textbook, after all, but it seems to have broader appeal. At used bookstores, like abebooks.com, it has been selling for much more than list price (possibly because some online stores were out of stock for a while). There will be short paper from Cato.org in January that summarizes a few key points in the book.

[Kevin]

Well bully for you, and I look forward to reading the book as soon as I can sell one of my kidneys. But, it only takes 4 words to dispel the myth that Americans have not been getting wealthier: "Pet Health Care Insurance".