Timothy Taylor excerpts from the latest issue of the Journal of Economic Perspectives.
Steven N. Kaplan and Joshua Rauh write,
We believe that the US evidence on income and wealth shares for the top 1 percent is most consistent with a “superstar”-style explanation rooted in the importance of scale and skill-biased technological change. It is less consistent with an argument that the gains to the top 1 percent are rooted in greater managerial power or changes in social norms about what managers should earn.
Josh Bivens and Lawrence Mishel write,
the increase in the incomes and wages of the top 1 percent over the last three decades should be interpreted as driven largely by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences.
As President Kennedy once asked two of his advisers on Vietnam, “You two did visit the same country, didn’t you?”
“However, in this paper we are referring to rents in a broader sense: in this
discussion, a “rent” means only that the income received was in excess of what was
needed to induce the person to supply labor and capital to these respective markets.”
So…redefine any increase in income as a rent, and QED?
Superstar wages *are* rents. The general economy gets bigger, too – when JP Morgan was the richest man in America, he swung more of the economy than Bill Gates did when Bill G. was the richest, but Bill G was arguably richer in absolute terms. “Winner take all” happens because a more diverse portfolio of winners appeals to some thing that is still in short supply, like mental bandwidth of consumers or some other channel.