He writes (link is to enormous PDF file)
if American productivity growth had not slowed after 1973, today the median household would earn $30,000 more each year. Alternatively, if income inequality had not accelerated after 1973, today the median household would earn an extra $9,000 more. That is less than one-third of the loss from the productivity slowdown.
His point is that we should pay more attention to productivity. Of course, many policies that ostensibly reduce inequality serve to harm productivity. And there are some ideas, included in Tyler’s essay, that could help with both. Reducing occupational licensing, for example.
My guess is that on policy issues, Tyler is not terribly far from his “opponent” in the volume, Melissa S. Kearney. If anything, her proposals for reducing inequality would take longer to work than his.
Probably the most contentious debate in the volume concerns the employment-reducing effects of government tax and transfer programs. Robert Moffit says that the effect is small, while Casey Mulligan says that it is large. It would be nice to see if they could pin down the reason for their difference of opinion–is it that Mulligan looks at more programs in more detail, or do they take a different view of the shape of the labor supply curve?
It is reasonable to worry about poverty but so much about equality. Why care about the fact that two people who are well off might not have equal income or wealth? Yet inadequacy of means is usually cast as a problem of inequality rather than poverty. This is a sign that ideology rather than rational analysis is in play.
Some goods are fixed in supply regardless of what happens with GDP, and therefore the distribution of power determines how much of them you get. If power is distributed unequally you will have access to few of these goods.
Beyond that, perhaps there is less tension between inequality and growth then people like to make out. A lot of this comes down to GDP factory stuff. Not everything that makes an individual rich is actually good for overall “growth”. It often sounds more like, “if you stop this underhanded destructive bullshit I’m doing to get rich it will hurt growth”.
Perhaps I am getting cynical, but I can’t help but reading a bit of Straussian signaling between the lines.
In this case, the point seems to be … well … Average is Over.
In other words, that rising income inequality and falling productivity growth are most likely consequences of spontaneous market forces given the path of technological innovation. It makes no sense to extrapolate any number from a trend that broke nearly 50 years ago and pretend it is a meaningful and reliable figure over which the government could have had some influence had it intervened appropriately, and which it could still manipulate at will.
If one is going to play that game, then why not pick some even more disappointingly broken trend, e.g. productivity growth and claim it’s even more important, and say, if we are going to pretend that government policy can fix old broken trends, then it should focus on that one.
I suppose he could have gone further and said that the average height of Americans would be over seven feet tall had some old trend kept following the line drawn during the era of its most rapid improvement, but then the embedded critique would be too obvious and no longer plausible deniably, and it wouldn’t fool the usual suspects into taking the argument seriously.