It seems that Paul Krugman takes issue with Justin Fox’s column in Bloomberg, asking why economists weren’t all that concerned about inequality until fairly recently. Krugman’s answer? Economists just can’t mathematically model inequality and data was limited. Because after all, social facts of life boils down to a math equation.
First, Fox. Many economists have been screaming about inequality from the mountaintops for a long time. Stiglitz and Reich come to mind. In fact, Stiglitz won his Nobel Prize for his work on market failures. That’s no small feat. And there were plenty of more classical economists screaming about inequality, especially Krugman’s god, John Maynard Keynes.
More than that though, Sociology has been screaming about inequality since Das Kapital, all the way through to Veblen, DuBois, Buroway and Ritzer.
Then there is Kruman. It is reminiscent of the Malthus-Ricardo debate of underconsumption. Krugman has screamed for a long time that aggregate demand is the problem (à-al-Keynes), and he’s not wrong. The problem is that Krugman believes that you cannot address underconsumption unless you can mathematically model it. Meanwhile, Sociologists understand basic logic – households cannot consume if they don’t have the money to consume. And why don’t people have the money to consume? Because of inequality – stagnant wages, underemployment, high debt, and all that.
The Malthus-Ricardo debate was simple: Ricardo believed that there were “laws” that determined economic activity among the classes (as long as those laws were agreed upon by the ruling class), while Malthus’s main argument was simple: not everything in this world can be mathematically modeled, especially the social human. There are exceptions to everything.
The fact is that the data was always available. If the data were unavailable then Picketty wouldn’t have written his book. I personally have data going back to the 1990s that shows rising inequality over time. Some of it can be modeled – I’ve modeled some of it myself. Some of it can’t, but can certainly be used as an exploratory tool. Then again, economics isn’t about “exploring” the social world. Economics is about the Church of Mathematical Assumptions. That’s why there are Sociologists, I guess. I’m with Malthus on this one – not all social facts can be mathematically modeled, and inequality is a social fact.
As much as I respect Krugman, I was taken aback by his seeming idea that if it can’t be modeled, then it’s not worth studying. Everything is worth studying, especially things like inequality that destroy people’s lives on a social scale. Besides that, Krugman has been the champion of regulation and Wall Street reform for the same inequality reasons – how do you model that? Sometimes you just have to think outside the quadrangle.