Dismal Scientists A new book spurs the thought: It’s time to link economics to a language of values

By Lawrence Mishel

It is curious that in American politics, "values"
issues are always social issues but never economic
ones. Yet how the disadvantaged among us are treated is
clearly a reflection of who we are as a people.
Similarly, how workers are treated on the job — their
safety, their working conditions, their remuneration —
also speaks volumes about our values as a nation. This
is also true for child poverty.

After reading Is the Market Moral? by Rebecca Blank and
William McGurn, a new Brookings Institution book
sponsored by the Pew Forum on Religion and Public Life,
I began to consider how small a role religious, even
secular, values play in discussions of economic
policies and trends.

Of course, economists contend that economics is a
science. "Tell me what you want to do and I will tell
you the best way to do it" is the economist’s usual
stance. (Actually, as one economist said, his role is
to say, "Tell me what you want and I’ll tell you why
you can’t have it.") Clearly, there’s no room for
values. The underlying assumption is that unfettered
markets produce the best outcomes, except in a few very
specified situations: externalities (such as pollution
imposed on society but not reflected in producers’
costs), monopolies, and other "market failure" cases
everyone has had to study in Econ 101. Some economists
(Martin Feldstein, for one) have contended that
inequality is not a proper concern for economists. They
should be concerned only with determining how to
maximize the output of goods and services.

It is important to examine whether unfettered markets
are the appropriate means of organizing our economy,
both in terms of the values we seek to see reflected in
our society and for achieving our economic goals. One’s
view of the proper role of individuals, institutions,
and government in the economy is determined, in large
part, by one’s assessment of the merits of "unfettered
markets." The U.S. economic-policy debate is in fact
dominated by the assumption that unfettered markets
work best, a view that’s applied to our domestic
economy and to that of other countries through
international financial institutions that the United
States controls. John Kerry’s recent statement that he
is "not a redistributionist" indicates how dominant
this view has become.

Yet there is plenty of room for applying values to the
economy. An economy can be structured in many different
ways and yet achieve the same amount of efficiency,
i.e., produce the same outputs with the same inputs.
This was the conclusion of a book that Rebecca Blank
edited for the National Bureau of Economic Research
(NBER) a decade ago. Major European countries, for
example, have a set of policies that are far different
from ours: a strong social insurance system, government
provision of health care, higher taxes, and far less
inequality. Yet these countries have seen faster
productivity growth — the gain in economic efficiency
— than the United States for most of the last four
decades. At first, this trend was mainly a process of
"catching up" to the United States, the technological
leader. However, many of these countries have now
surpassed the United States in productivity.

It seems impolite in America to mention this, but we
live in a class society. Let’s just say there are
various groups differentiated by their income and
power, and that the positions of these groups are
strongly maintained over time. It’s not that there
isn’t any upward and downward mobility; it’s just that
there’s not enough of it to make having a favorable, or
unfavorable, class position seem like a temporary
arrangement

There has been a dramatic upward shift in income over
the last few decades. In fact, inequality has grown far
more in the United States over the last three decades
than at anytime in the last century, and far more than
in any other advanced country.

Using some data from NBER researchers Thomas Pikkety
and Emanuel Saez, it is possible to illustrate how
large both the income redistribution and the scale of
inequality in America has been:

*The top 1 percent of families earned 9.3 percent
of all income in 1980. By 2000, this income share had
increased to 19.6 percent. Correspondingly, the income
share of the bottom 90 percent declined from 66 percent
to 53.9 percent. There were small gains (1.9 percentage
points) in the income shares of the remaining group,
the 90th to 99th percentiles. *From 1980 to 2000,
the incomes of the upper 1 percent increased 179
percent, while those of the bottom 90 percent increased
by 8 percent. *In 1970, the ratio of top executive
earnings to that of the average worker was 38.6 to 1.
This ratio increased to 101.1 by 1980, to 222 by 1990,
and to 1046 in 1999. Because of the inequality in the
United States, even though our per-capita income is
higher than many countries, our low-income families are
not better off than those in other places where
per-capita income is lower. And even though we think of
ourselves as a mobile society compared with Europe,
recent research indicates that the United States has
less class mobility than previously believed, nor has
it changed much over the last few decades.

And even if income were distributed according to merit
or to the value of one’s skills, we would still need to
care for those worst-off and guarantee them a decent
standard of living. Moreover, children do not start off
with the same amount of resources — monetary assets or
family "social capital" — so economic outcomes depend
at least as much on background as on effort or
character.

The social class a person belongs to really matters —
it determines your health, how long you live, where you
live, your exposure to crime, your success in school,
and the likely success of your children. A task force
of the American Political Science Association has
recently concluded that inequality in income and
resources translates into inequalities in participation
and effectiveness in our democracy.

This leads me to think that economic issues are just as
much "values" issues as any of those that are more
frequently discussed. Moreover, the teachings of the
various faiths have much to say on economic matters. I
daresay that there’s no reason to believe that
unfettered markets provide us with the type of society
our faiths guide us to have in terms of the lives of
the poor, the treatment of workers, and the solidarity
of our communities.

Lawrence Mishel is the president of the Economic Policy
Institute (EPI). He writes a monthly column on economic
issues for the Prospect’s online edition. Copyright (c)
2004 by The American Prospect, Inc. Preferred Citation:
Lawrence Mishel, "Dismal Scientists", The American
Prospect Online, May 27, 2004. This article may not be
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