Unequal Democracy

Over at Princeton University Press, Chapter 1 of Larry Bartels Unequal Democracy:

While economists have spent a good deal of scholarly energy describing and attempting to explain the striking escalation of economic in equality in the United States over the past 30 years, they have paid remarkably little attention to social and political factors of the sort cited by Krugman. For example, one comprehensive summary of the complex literature on earnings in equality attempted to ascertain “What shifts in demand, shifts in supply, and/or changes in wage setting institutions are responsible for the observed trend?” The authors pointed to “the entry into the labor market of the well educated baby boom generation” and “a long- term trend toward increasing relative demand for highly skilled workers” as important causal factors. Their closest approach to a political explanation was a passing reference to a finding that “the 25 percent decline in the value of the minimum wage between 1980 and 1988 accounts for a small part of the drop in the relative wages of dropouts during the 1980s.”

It probably should not be surprising, in light of their scholarly expertise and interests, that economists have tended to focus much less attention on potential political explanations for escalating economic in equality than on potential economic explanations. In a presidential address to the Royal Economic Society, British economist A. B. Atkinson criticized his colleagues’ tendency to ignore or downplay the impact on the income distribution of social and political factors, arguing that “we need to go beyond purely economic explanations and to look for an explanation in the theory of public choice, or ‘political economy’. We have to study the behaviour of the government, or its agencies, in determining the level and coverage of state benefits.”