What Is A Great Gatsby Curve And Why Do I Care?

Council on Economic Advisors Chairman Alan Krueger sparked a lot of debate with a recent speech (PDF) on inequality at the Center for American Progress where he made reference to, among other things, a chart he called “The Great Gatsby Curve” illustrating that countries with more unequal distributions of income have less social mobility. That gave rise to a critique from Scott Winship, a reply to Winship from Miles Corak, and an effort by Tyler Cowen to dismiss the whole thing as meaningless.

I think the discussion is getting a bit turned around and confused.

For starters, I don’t understand what any of this has to do with The Great Gatsby, an excellent book that as far as I can tell has nothing to do with the impact of ex ante income inequality on future social mobility. If anything Gatsby seems to be a critique of America’s tendency toward knee-jerk valorization of upward mobility and grasping ambition. Which is perhaps a theme Krueger should have stook with. At the same time, Krueger’s antagonists should remember the proper context for this debate. Income inequality has increased a lot in the United States over the past thirty years, and American politics is increasingly organized around one coalition that wants to respond to that with higher tax rates on high income earners and another coalition which wants to oppose those efforts. Everything we’re talking about here are rhetorical and analytic moves in that game. And the reason mobility is relevant is that one move Team Don’t Soak The Rich has made is to argue that income inequality doesn’t matter because the United States is a uniquely wonderful classless society with massive social mobility. That means the onus is on Team Don’t Soak to demonstrate that this is true and relevant or else to withdraw the claim. Krueger, like many others on Team Soak, is making an effort to show that it’s not true. Attacks on Krueger that end up attacking the conceptual underpinnings of measuring or caring about social mobility undermine Team Don’t Soak’s side of the argument. 

It’s important to get that straight. It’s Paul Ryan and Mitt Romney who brought social mobility and equal opportunity up as an alleged alternative to welfare-enhancing redistribution of income. I agree with Cowen—and for that matter F. Scott Fitzgerald—that this is a somewhat confused idea that doesn’t withstand much practical scrutiny. But that puts us back where we started with the fact that the American economy has grown a lot over the past thirty years but a huge share of that growth has gone to a very small slice of the population and that this is not compensated for in any meaninful way by the existence of boundless upward opportunities.