Facts on inequality?

New Economist presents the findings of recent research into inequality. In so doing, I am reminded of why I find macroeconomics dull and unappealing.

1. Inequality first rises and then falls with income.
2. More unequal societies are much less likely to have democracies or governments that respect property rights.
3. Unequal societies have less redistribution, and we have little idea whether this relationship is caused by redistribution reducing inequality or inequality reducing redistribution.
4.  Inequality and ethnic heterogeneity are highly correlated, either because of differences in educational heritages across ethnicities or because ethnic heterogeneity reduces redistribution.
5. Finally, there is much more inequality and less redistribution in the U.S. than in most other developed nations.

(Emphasis mine)

And what's the conclusion?

The literature on the political economy of inequality does not give clear answers on policies, but it does suggest that shifts in inequality may influence polities in far-ranging, substantial, and often unpredictable ways.

This is what I would have told you without seeing any data, or performing any statistical technique to extract correlations. In effect, this paper is saying that macroeconomics can ascertain the statistical likelihood that various variables will occur, but provide virtually no insight into why they occur, why they occur together, or how we can generate them.

It is statistics, not economics. It is facts without theory. It is bullshit. 

Have a look at my thoughts on macroeconomics

Comments

[dearieme]

Universities are very slow at abandoning intellectual adventures that have failed. They are quite quick at abandoning successful "mature" subjects: they seem to quite like arguing that there's little mileage left in them. Have you got a microeconomic explanation for that?

[AJE]

I think a combination of Mancur Olson, Phil Mirowski, FA Hayek and Karl Marx can provide a pretty coherent explanation, but you'll have to bear/bare (?) with me whilst I develop it!

[chris]

You and I disagree about a lot, but you're spot on here. Macroeconomics tells us almost nothing of interest about the causes of inequality. The interesting question is the other direction of causality: does inequality affect macroeconomic performance? There's some interesting stuff here:
http://www.wws.princeton.edu/rbenabou/
However, even if one could establish a causation from inequality to poor macro performance, few of us egalitarians would regard this as the decisive argument in our favour.