(Bloomberg View) — In the early 1980s, the share of earnings going to those at the very top of the income distribution in the U.S. — the 1 percent — began to rise a lot.
For two decades, the economics profession barely noticed.
Then, in the early 2000s, Thomas Piketty of the Paris School of Economics and Emanuel Saez of the University of California-Berkeley began releasing evidence, gleaned from Internal Revenue Service data, that top earners’ share had doubled since 1980, and was higher than at any time since the Great Depression. (Their research was first published in the Quarterly Journal of Economics in 2003, but had been widely disseminated before then and discussed in a 2002 New York Times Magazine article by Paul Krugman.)
Their data showed even more dramatic gains higher up on the scale — the share of income going to those in the top 0.1 percent had more than tripled in the 1980s and 1990s, while the share going to the top 0.01 percent had almost quadrupled.
Since then, inequality has become a major focus of economic research. At the annual meetings of the American Economic Association and a host of affiliated organizations that I’m attending in San Francisco this week, I’ve counted at least 70 papers, speeches and panel discussions devoted to income and wealth inequality.
The topic creeps into discussions of many other matters as well. Reports Nelson Schwartz in The New York Times:
“In the last few years, there’s been a huge change in the mainstream of the profession,” said Steven Fazzari, an economics professor at Washington University in St. Louis who first came to the conference as a job-hunting graduate student in 1982. “The issue of income inequality was a backwater in the economics field, and it was largely ignored.”
Interestingly, this explosion in inequality research has occurred in a decade when the share of income going to the very top has actually declined slightly, according to the World Wealth and Income Database maintained by Piketty, Saez and several others.
The top 1 percent’s share of pre-tax income peaked in 2007, at 22.8 percent. In 2014 it was 21.2 percent.
So economists largely ignored a major economic phenomenon as it was occurring, and now they’re obsessing over it even though it may have peaked or at least paused. What’s up with that?
The answer may lie in agnotology, the study of the cultural suppression of knowledge. That’s what Dan Hirschman, a lecturer in economic sociology at the University of Michigan who will start work later this year as an assistant professor of sociology at Brown, proposes in a chapter, titled “Rediscovering the 1%: Economic Expertise and Inequality Knowledge,” of his brand spanking new Ph.D. dissertation. It makes for interesting reading.
The term “agnotology” was coined 20 years ago by Stanford University historian of science Robert N. Proctor. Epistemology is the study of what knowledge is and how it is acquired; Proctor proposed, half-jokingly it seems, that agnotology was the opposite.
Proctor was referring at the time to the tobacco industry’s efforts to obscure the links between smoking and cancer. Hirschman’s account of the economics profession’s treatment of inequality relies on no such deliberate suppression of knowledge. It is about, in his words, “normative ignorance” instead of “strategic ignorance.”
The National Bureau of Economic Research published the first detailed analyses of the U.S. income distribution based on tax records in the early 1920s, with a heavy focus on those near the top because at that point they were the only Americans who paid income taxes. The Commerce Department’s Bureau of Economic Analysis later took over the project and published detailed income-distribution data in the 1950s and early 1960s, and again briefly in the 1970s.
The BEA finally gave up not because of political pressure but because its resources were limited and economists just didn’t seem interested in the numbers. Macroeconomists were satisfied with knowing the economy-wide income breakdown between labor and capital, while labor economists were more interested in survey data that allowed them to connect incomes to variables such as education, gender and race. The fact that those surveys had to be “top-coded” — results from those with the highest incomes were censored to protect people’s privacy — didn’t seem to be a major problem. In Hirschman’s telling, the discipline had established two “regimes of perceptibility” that rendered what was going on at the top of the income distribution invisible.
When anecdotal evidence of rising incomes at the very top began to appear in the 1980s, economists mostly ignored it. Lester Thurow of the Massachusetts Institute of Technology was a significant exception, but by that point he was more a public intellectual than a research economist, and his arguments didn’t get much traction within the discipline.