“The Market Picture”

NYTchart

Credit: The New York Times (click through to source)

As a followup to inequality still being, you know, a thing, I’d like to highlight what economist Dean Baker from the Center for Economic and Policy Research writes here. Towards the end I made it a point to remark that Saez and Piketty’s analysis of income growth in the past three years is pre-tax and pre-transfer — that is, what essentially happens in the market before the government taxes individuals and transfers it to other individuals. I specifically described this as “the market picture.”

Yet that’s not entirely true.

Baker objects to a similar characterization made by Tom Edsall, who described the past three decades of income inequality growth as a ‘market story.’ After running through a litany of examples of why that isn’t true, Baker ultimately rests on the assertion that “inequality was driven by government policies that redistributed income upward.”

Fair enough. I think the origin point for Edsall’s analysis (and to some extent, mine) was twofold; 1) the story of the past three decades, including the last three years, of market income has been about a tiny sliver of Americans doing very well and everyone not, and 2) this is within the context of a federal government that spends money like a public insurance company with an army. Those two things don’t preclude that actions (or, indeed, inactions) taken by the federal government can and do have an impact before you get your stagnating paycheck. So in this sense income inequality is only presented as a market narrative in that it occurs before the majority of the federal budget kicks in. This isn’t a contested idea, yet because it is more relevant to how we traditionally view public policy options it’s used as a simplifying frame for limited comparisons.

This sort of talk breaches the fourth wall, sort to speak, of distinguishing between “the market” and the “the state” in a society with a mixed market economy. It also breaks the commonplace understanding of how we collectively organize and interact with each other, as we usually think of social institutions as separate entities. More broadly, though, markets are fundamentally a social construction. They don’t appear out of thin air, but in particular the capitalist economy exists because of an accumulation of collective decisions and norms of exchange codified by the state. There is no such thing as an autonomous free market in the sense that many see it. Furthermore, markets are embedded in, not separate from, non-market social relations. That is, there is no part of the formal economy that occurs prior to government influence, nor prior to the numerous other ways in which we interact on meso and macro, individual and institutional non-market levels.

Such a conceptualization should have implications for how we view income inequality. It eschews the typical framing of deleterious market outcomes as the result of individuals, or caused by government ‘meddling.’ It should tell us that “the market picture” is altogether more complicated, more complex, and inappropriate to disentangle from society as as a whole. It also doesn’t mean we’re absolved from inequality’s impact. If the market is a social construction then we have social authorship of it’s consequences.

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3 responses to ““The Market Picture”

  1. Pingback: “This economic institution could not exist without a high degree of social solidarity…” | Punditocracy·

  2. Pingback: The War On Poverty Turns 50. Where Do We Stand? | Punditocracy·

  3. Pingback: The War On Poverty Turns 50. Where Do We Stand? | The McLean Parlor·

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