Greg Mankiw posted a blog defending the 1 percent richest people four days ago, and Paul Krugman obviously had a disagreement with that, he then wrote a post against Mankiw’s avocation.
Actually this is not the first time those two greatest economists disagree with each other on the equality problem. On June 8, 2013 Mankiw published his article Defending the One Percent, claimed that inequality problem is not that serious and the fixing the inequality is so hard and may result in the unfairness for those rich people. He argued that the reason why some people are richer is simply because they are better (in every possible way). And he also said the absolute equality is actually inequality, and actually rich people had contributed for the economy more than others in US. Basically, Mankiw’s idea is to control intervention toward equality in order to maximize efficiency.
In opposite, Krugman proposed that “We live in a society that allocates rights to intellectual property in a way that yields huge rewards to a select few, that taxes top incomes at a historically low rate”. Also on the other hand, Mankiw neglect the inequality of opportunity, which is vital to decide whether the resource will be allocated in a fair way, for this, Krugman said that children from rich families are more likely to remain their top position. Finally, he found it absurd for Mankiw to think that solving inequality would lead to absolute equality.
Now this “war” has been updated.
Mankiw’s new blog Yes, the Wealthy Can Be Deserving once again insisted on the rightness for rich people to own huge amount of money. Mankiw gave an example about Robert Downey’s income through the film The Avengers and argued that those incomes are totally legitimate and the player himself deserved the money, thus there should be no doubt toward the inequality. In addition, he believed that financial systems are “allocating the economy’s investment resources” fair enough to make the country work effectively.
One days later, Krugman agian wrote a blog to comment on Mankiw’s article. First he noted that film stars are not representative in terms of the “upper tiers of the income distribution”, executives from finance, corporate and real estate are actually what we are referring to as top 1 percent. And he strongly disagree with Mankiw’s statement about fair distribution, he pointed that our financial crisis was caused by the rich-dominated financial systems. So there is no such effectiveness addressed by Mankiw.
For me, I agree almost with Krugman, however, I also think it is great for Mankiw to think from the way of economic efficiency and dear to fight against main stream idea as long as he thought it is unreasonable.
I’d like to see this to continue and learn more from it.