ECONOMIC HANDWAVING….In the New York Times, Greg Mankiw tries to pretend that growing income inequality is inevitable if we want the overall economy to grow. Try to reduce income inequality, he says, and you just end up with a recession.
It’s a nice try, but Brad DeLong plots the actual data and shows that Mankiw is talking through his hat. In fact, it looks pretty much the opposite to me. Go look at Brad’s pretty charts and decide for yourself.