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Wednesday, December 13, 2006

And now for the truth about the economy:

Via Francisco Capella, David R. Henderson reviews the book Income and Wealth in his article What's Really Happening in the Economy?
How about the "vanishing middle class?" To say that the middle class is vanishing, one must have a definition of the middle class. A sensible person would probably define it as the group of people in the middle, say the middle quintile or the middle three quintiles. But that's not how the commentators who have made the claim have defined the middle class. Instead, they take the group of people making income within a fixed range in inflation-adjusted dollars, say, between $35,000 and $50,000, and show that the percent of the overall number of families within this range is falling. In commenting on this way of defining the middle, Reynolds points out an obvious but, nevertheless, often completely overlooked fact:

"Such a fixed definition ensures that the proportion of households in the middle group must decline with a rise in general prosperity, because rising prosperity causes a rising percentage of families to earn more than $50,000." (emphasis his)
Paul Krugman's been using lies, damn lies, and statistics to distort the truth about the economy. It was about time someone called him on it.

2 Comments:

At 12:07 PM, Blogger J. Peden said...

From what I keep hearing, here and there, the top 95%-97% of people in the U.S. keep getting richer.

The remaining number involves more of an intractable residue of people who are disabled by addiction and mental disease, or even by choice, etc..

Btw, why are the "homeless" not on Welfare?

 
At 2:53 PM, Blogger Alan Reynolds said...

Why the homeless aren't on welfare: There has never been a federal program (or state either, in most cases)to help people who are simply broke, and either unable or unwilling to work. Aside from subsidies to peanut and sugar farmers and the like, getting cash from Uncle Sam requires being blind, or the parent of young children, or very old. Alcoholics and drug addicts might get disability, but only if they know how to work the system. I'm not sure what to do about this, but I am sure the government won't do it. Poor people don't contribute to political campaigns and they rarely vote.

 

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