Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, July 28, 2005

Trends in Income Inequality

I was intrigued by a recent posting by Ben Muse, noting that income inequality in the U.S., by most measures, peaked sometime between 1910 and the late 1920s. Ben cites this paper by Rosenbloom and Stutes, who conclude:

Compared to estimates for the early twentieth century, the distribution of wealth at the national level... was relatively equal. In 1870 the top 1 percent of wealth holders owned 27.9 percent of all property, about one-third less than was the case in 1916.
One reason this piece intrigued me so much is that back in the late 1960s, before I went to Iowa State for grad skool in economics, when I inadvertently backed into an economic history course taught by Robert Fogel, I wrote a paper on changes in income distribution over time.

I posited that if potatoes are an inferior consumer good, then the more poor people there are, the greater should be the per capita expenditure on potatoes. Or something like that. I spent days, poring through historical volumes, collecting data, compiling a series. And sure as shootin', the series I compiled peaked about 1915 or so. Not a bad proxy, eh? Maybe I should dust it off, update it, and try to publish it.
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