Hacker Update

I blogged yesterday on some new research purporting to show that the increase in earnings volatility Jacob Hacker documents in The Great Risk Shift didn't actually happen. I'm now told that Hacker will be coauthoring a followup study soon which is going to argue that while his earlier research may have overestimated the extent of the effect somewhat, but it's still real.

All worth keeping one's eye on. Still, as I say, I think the main lesson of all this is that it's a mistake to ground arguments for big agenda items like health care reform in transient economic trends. At the end of the day, most of these things are either good ideas on their own terms, or else they aren't. Getting bogged down in these trend analyses isn't, I think, especially helpful or important in political terms.

Comments

I have to partially disagree with this sentiment. Obviously, I think, economic trends are really important when you talk about economic policy. If you could show that lowering the tax rates on the rich was better for the economy as a whole and better for the middle and lower classes in particular, that would be a very strong argument in its favor. But instead, over the last 20-30 years the income share of the top 1 percentile as increased from 8% to 16%. That says to me, very strongly, that somehow we are allowing the upper-upper class to pull away too much.

Maybe you would call income volatility a transient trend while this other effect is more *permanent*. But it seems to me like it becomes a judgement about the how solid the evidence for a trend is and how important it is to economic policy. My view is that the volatility argument was to weak to push as a centerpiece of legislative policy justification, but that's a judgement that has to be made on the merits.

Posted by mpowell | January 18, 2008 12:55 PM

I agree that grounding policy, or justifications for policy, in economic trends that have the potential to change is not a great idea, for the reasons you state, (no one wants their argument to depend on something that could go poof at any moment), but I've always found this particular justification/trend, a risk shift, particularly appealing, since it's always seemed insane to me that we think ourselves prosperous when things that, in my mind anyway, represent security, like a house, like health insurance, are so expensive.

Posted by MrTimbo | January 18, 2008 1:20 PM

On the health care issue: I think this is an idea that Matt has talked about before and I agree with. We should provide health care b/c delinking health care from employment would make people's lives a lot better and improve economic efficiency. You don't have to resort to economic trend based arguments to make that particular policy argument. But I still maintain that there are plenty of trend based arguments that we can't throw out. How about: capitalism is a good economic system b/c it leads to a trend of increasing GDP?

Posted by mpowell | January 18, 2008 1:38 PM

So whether an idea is "good" or not shouldn't depend on what's happening in the real world? Hmmm. Gotta think about that one a little.

Posted by mq | January 18, 2008 1:43 PM

it's a mistake to ground arguments for big agenda items like health care reform in transient economic trends.

OK, let's make a deal. You tell policymakers which trends are transient, and they'll avoid basing policies on those trends.

While you're at it, please help me write the Nobel Prize-winning econometrics paper that finally figures out how to separate trends from cycles. My career could use a boost.

Posted by Mr. Noah | January 18, 2008 3:12 PM