Piketty has written a book that nobody interested in a defining issue of our era can afford to ignore.

That is from John Cassidy. Other reviewers often speak of inequality as the defining issue of our time. Brad DeLong has collected many reviews. Clearly, this book is serving as a rallying point for the cause of redistributing rather than creating wealth. Its appeal to academics is particularly strong.

If you had asked me, I would have said that the defining issue of our time is unsustainable government finance. Most major national governments have made promises that they are unlikely to keep. Our state and local governments are cutting back on services, and in a few cases going bankrupt, in order to pay pensions to former employees. The outlook for politics is grim.

And yet we are being told to focus on inequality as the defining problem of our time.

I have not yet read the Piketty book. Perhaps I will find it persuasive. But I do not understand how Larry Summers, who believes that we are in a period of secular stagnation, with an excess of capital and an equilibrium real interest rate that is negative, can give a positive review of a book that says that we have such a capital scarcity that we will see a real interest rate greater than the economic growth rate for the indefinite future.

It seems to me that the development of India and China, along with ongoing technological change, is making the gap in incomes between those countries and ours smaller, while the gap within the United States widens. I am not convinced that this represents a net increase in inequality, much less that it is the defining problem of our time. Twenty years from now, my guess is that the people who are worried about this problem, and not the problem of unsustainable government finance, will not seem particularly astute.

Ron Haskins writes

The program of this type that has had the most success so far is called career academies, in which students organize into small learning communities to participate in academic and technical education for three or four years during high school. Perhaps the most important aspect of the program is the opportunity students have to gain several years of experience with local employers who provide career-specific learning experiences. An eight-year follow-up of young adults who had participated in career academies showed limited effects on young women but major effects on young men. Young men who had been in the program were about 33% more likely to be married, were about 30% more likely to live with their partners and their children, and earned about $30,000 more over the eight years than the men in the randomized control groups. Expanding the reach of career academies, especially in high-poverty areas, would be a wise investment.

He lists other ideas, including extending the Earned Income Tax Credit to single parents.

Richard Reeves writes,

say, the top decile, or 10%, of the income distribution.

This stratum is not only prospering economically. For the people on this top rung, education levels are high and rising. Families are planned, marriages strong, neighborhoods safe and rich in social capital, networks plentiful, BMIs low and savings rates high.

Below these are what Reeves calls “the squeezed middle” and then the “entrenched poor. Reeves later writes,

Data recently unveiled by my colleague Gary Burtless, showing income growth since 1979 across the distribution, shows that in terms of after-tax income, those at the top have done really well since 1979; that’s perhaps not a surprise. What might be more instructive is the relative performance of the lowest quintile and the middle – ie. a 49% rise compared to a 36% rise. Income growth has clearly been weakest in the middle of the distribution.

Pointer from James Pethokoukis.

The new paper by Greenwood, et al.

The wife’s contribution to household labor income is significantly larger in 2005 relative to 1960. This share rises with the income percentile. At the 80th percentile the share that married woman provided to household income rose from 16 to 34 percent, and from 13 to 25 percent at the 20th percentile.

He writes,

Chetty et al. finds that the regression of kids’ income rank on parents’ income rank has a coefficient of 0.3. (See Figure 1.) That implies an R2 for the regression of 0.09. In other words, 91 percent of the variance is unexplained by parents’ income.

I would be willing venture a guess, based on adoption studies, that a lot of that 9 percent is genetics rather than environment. That is, talented parents have talented kids partly because of good genes. Conservatively, let’s say half is genetics. That leaves only 4.5 percent of the variance attributed directly to parents’ income.

Read the whole post. In fact, if the correlation between kids’ income and parents’ income is only 0.3, then this is considerably lower than the heritability of many other traits.

If you have only seen the blogosphere coverage and not read the paper, co-authored with Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, then here are some findings you have missed.

the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area. As with race, parents’ marital status does not matter purely through its eects at the individual level. Children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.

and

high upward mobility areas tend to have higher fractions of religious individuals and greater participation in local civic organizations.

and

no systematic correlation between mobility and local labor market conditions, rates of migration, or access to higher education.

The authors emphasize that these are correlations, not causal relationships. Still, these results seem more promising for social-conservative policy wonks than for progressive ones.